Question

You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information: Sales price per abalone = $34.80 Variable costs per abalone = $5.90 Fixed costs per year = $373,000 Depreciation per year = $118,000 Tax rate = 35% The discount rate for the company is 15 percent, the initial investment in equipment is $826,000, and the project’s economic life is seven years. Assume the equipment is depreciated on a straight-line basis over the project’s life. a. What is the accounting break-even level for the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Accounting break-even level units b. What is the financial break-even level for the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Financial break-even level units

Answer 1