Niko has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of six years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $750,000. The sales price per pair of shoes is $61, while the variable cost is $15. $175,000 of fixed costs per year are attributed to the machine. Assume that the corporate tax rate is 35 percent and the appropriate discount rate is 9 percent. Required:
What is the financial break-even point?

7812.60 units

Explanation:

PVIFA 9%,6years = [1-(1+r)-n/r]

=[1-(1-1.09)^-6]/0.09

= 4.4859

EAC = Initial Investment / PVIFA 9%,6year

EAC = $750,000/ 4.4859

EAC= $167,190.53

Annual depreciation = $750,000 / 6

Annual depreciation = $125,000

The financial Break-even point for this project is:  QF = [EAC + FC(1 – tC) – Depreciation(tC)] / [(P – VC)(1 – tC)]

Break-even point =[167,190.53 + 175,000*(1-0.35) - 125,000*0.35]/(61-15)(1-0.34)

Break-even point = {167,190.53 + 113750 - 43750} / 30.36

Break-even point =  237190.53 / 30.36

Break-even point = 7812.59980

Break-even point = 7812.60 units

enjoy the dunce cap fool

two years ago, when picking flowers in the mountains back of yosemite valley, i found a book. it was blotted and storm-beaten; all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however; many of the inner pages were well preserved. and although all were more or less stained and torn, whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today; its granite pages have been torn and blurred by the same storms that wasted the castaway book.

two years ago, when picking flowers in the mountains back of yosemite valley; i found a book. it was blotted and storm-beaten, all of its outer pages were mealy and crumbly. the paper seemed to dissolve like the snow beneath which it had been buried, however, many of the inner pages were well preserved. and although all were more or less stained and torn; whole chapters were easily readable. this is the condition of the great open book of yosemite glaciers today, its granite pages have been torn and blurred by the same storms that wasted the castaway book.