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A project has the following estimated data: price = $79 per unit; variable costs = $41.87...

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Finance

A project has the following estimated data: price = $79 perunit; variable costs = $41.87 per unit; fixed costs = $6,900;required return = 9 percent; initial investment = $10,000; life =six years. Ignore the effect of taxes.

  

a. What is the accounting break-evenquantity?

  

b. What is the cash break-even quantity?

  

c. What is the financial break-evenquantity?

  

d. What is the degree of operating leverage atthe financial break-even level of output?

Answer & Explanation Solved by verified expert
3.9 Ratings (381 Votes)
Accounting BEPSPVC x BEP units Fixed Cost794187 x BEP units 6900BEP Units 1858335578As there cant be partial units we should assume it to be 186units the next highest integerCash BEPWe reduce the Fixed cost by depreciation as it is a non cashexpenseSPVC x BEP units Fixed Cost DepreciationDepreciation    See Answer
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A project has the following estimated data: price = $79 perunit; variable costs = $41.87 per unit; fixed costs = $6,900;required return = 9 percent; initial investment = $10,000; life =six years. Ignore the effect of taxes.  a. What is the accounting break-evenquantity?  b. What is the cash break-even quantity?  c. What is the financial break-evenquantity?  d. What is the degree of operating leverage atthe financial break-even level of output?

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