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The furniture manufacturer would like to conclude a 4-year agreement for the purchase of 50,000 pieces per year at a price fixed price of $36/unit. However, the quantity could be between 40,000 and 60,000 units per year ( 20%). The deliveries would be made to him at a constant annual rate.

the company currently has enough space to carry out this contract. There is no opportunity cost associated with the use of this space for this contract. The production of this piece would require the purchase of two new presses at a price of $40,000 each, as well as tooling costing a total of $25,000. All this equipment belongs to category 43 of the DPA (d=30%) and would have a value of recovery of 20% of its cost at the end of the project.

Working capital requirements are estimated at 10% of sales annual and would be fully recovered at the end of the contract. the companies banker would agree to finance 50% of the total investment of $105,000 in machinery and equipment by through a loan at the annual nominal rate of 6%, compounded monthly. There will be four equal annual payments at the end of the year, comprising capital and interest. Investissement group also offers financing of $20,000 at the rate nominal of 5.25% per annum, compounded quarterly. For the first two years, the company will only pay the interest. The following two years, the company will have to make two capital payments of $10,000, plus interest.

The corporate tax rate is 25% and the boss believes the appropriate TRAM for this project is 15%.

a) Under the equivalent present value (PE) criterion, is this a profitable project at 50,000 units per year?

b) Determine the PE equation as a function of the quantity and calculate the economic breakeven point of this project by terms of units per year. (Proof: We want PE (15%) = 0$ depending on the quantity obtained

Cots variables unitaires Matires premires Main d'oeuvre directe Frais gnraux de fabrication variables Total par unit ($/un) 12,50 $/un 5,25 $/un 10,75 $/un 28,50 $/un Cots fixes Frais gnraux de fabrication fixes 300 000,00 $ Cots variables unitaires Matires premires Main d'oeuvre directe Frais gnraux de fabrication variables Total par unit ($/un) 12,50 $/un 5,25 $/un 10,75 $/un 28,50 $/un Cots fixes Frais gnraux de fabrication fixes 300 000,00 $

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