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In: Finance

Financial Break Even Unit Price Unit Variable Cost Fixed Cost Operating Cash Flow Investment Lifeo f...

Financial Break Even Unit Price Unit Variable Cost Fixed Cost Operating Cash Flow Investment Lifeo f Project Discount Rate
h 39 30 32,000 g 320,000 5 11%
j 50 27 55,000 i 440,500 6 15%
l 60 40 100,000 k 520,154 7 3%

In each of the following case, find the unknown variables: be sure to show all work

Solutions

Expert Solution

Financial Break even is also known as EBIT. When EBIT = 0, that point is known as financial break even point.

Break even point in units = Fixed cost / (Selling price - Variable cost)

In the given question unit price is selling price.

Break even point in units (h) = 32000 / (39-30) = 3555.55 units, rounding off to nearest whole number = 3556 units.

Break even point in units (j) = 55000 / (50-27) = 2391. 30 units, rounding off to nearest whole number = 2391 units

Break even point in units (l) = 100000 / (60-40) = 5000 units.

Financial break even = Break even point in units * Selling price

Financial break even (h) = 3556 * 39 = Rs.138,684

Financial break even (j) = 2391 * 50 = Rs.119,550

Financial break even (l) = 5000 * 60 = Rs.300,000

Operating cash flow = EBIT + Depreciation - Taxes.

We assume that there is no tax liability.

Depreciation is calculated as per straight line method.

Depreciation = Investment / life of project

Depreciation (g) = 320000 / 5 = 64000

Depreciation (i) = 440500 / 6 = 73417

Depreciation (k) = 520154 / 7 = 74308

Operating cash flow (g) = 138684 + 64000 = $202,684

Operating cash flow (i) = 119550 + 73417 = $192,967

Operating cash flow (k) = 300000 + 74308 = $374,308

jeff jeffy answered 2 years ago
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