The Howard Sports Company is considering a new production line. The expected economic life of the project is 7 years. Th
Posted: Sat Mar 19, 2022 5:55 pm
The Howard Sports Company is considering a new production line.
The expected economic life of the project is 7 years. The project
will generate sales and incur costs annually. Variable cost is 47%
of sales. Total annual fixed costs, excluding depreciation, are
$382,000. The initial outlay of the project is $1,308,000 and will
be depreciated on a straight-line basis to zero at the end of the
project (and the half-year rule does not apply). The company's tax
rate is 35% and the discount rate is 9.10%. Calculate the NPV
break-even level of sales.
a.
$2,408,177
b.
$3,872,652
c.
$1,477,677
d.
$1,667,518
e.
$1,287,837
The expected economic life of the project is 7 years. The project
will generate sales and incur costs annually. Variable cost is 47%
of sales. Total annual fixed costs, excluding depreciation, are
$382,000. The initial outlay of the project is $1,308,000 and will
be depreciated on a straight-line basis to zero at the end of the
project (and the half-year rule does not apply). The company's tax
rate is 35% and the discount rate is 9.10%. Calculate the NPV
break-even level of sales.
a.
$2,408,177
b.
$3,872,652
c.
$1,477,677
d.
$1,667,518
e.
$1,287,837