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Consider a project to supply Detroit with 26,000 tons of machine screws annually for automobile production....

Consider a project to supply Detroit with 26,000 tons of machine screws annually for automobile production. You will need an initial $5,900,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,425,000 and that variable costs should be $270 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $800,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $386 per ton. The engineering department estimates you will need an initial net working capital investment of $570,000. You require a return of 9 percent and face a tax rate of 21 percent on this project.

  

Calculate the accounting, cash, and financial break-even quantities.

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jeff jeffy answered 1 year ago
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