Question

1. Discuss how cash, accounting, and financial breakeven are calculated. Be sure to include the advantages/disadvantages of each. Also, discuss how NPV and IRR are calculated in Excel. What are the required inputs to each?

Could you please answer question as a short answer 4-6 senteces

Answer 1

*Any doubt please comment

Cash break even point is calculated using the formula : Fixed costs - Depreciation/ Contribution margin per unit

This break even point allows the company to understand the volume of sales that will be requried to cover the cash expenses during the period. The limitations of this method include that cash levels required will be same throughout may give distorted results.

Accounting break even point = Fixed costs / Contribution margin per unit

Advantages of this method include the organization can measure profits or losses at various levels , analyze the relationship between sales and variable costs. Disadvantages include assumption of production and sales are same all the time

Financial break even point = Fixed costs + Operating cash flow/ Contribution margin

Advantages of this method include it considers time value of money and disadvantages include it is time consuming process to calculate.

NPV syntax in excel : NPV( rate, value1, [value2], [value3], ... ) + Initial investment

IRR syntax in excel: IRR(values, guess) - This function returns the IRR for a series of cash flows that are represented as values.