A company considers introducing a new newspaper. Its direct competitor charges $0.25 at retail. The fixed cost charges to be $350,000 per month. The variable cost is $0.08 per copy, but advertising revenues of $0.05 per paper will be generated. To print the morning paper, the publisher has to purchase a new printing press, which will cost $620,000. The press machine will be depreciated according to a seven-year MACRS class. The press machine will be used for 10 years, at which time its salvage value would be about $100,000. Assume 365 issues per year, a 27% tax rate, and a 13% MARR. How many copies per day must be sold to break even at a retail selling price of $0.20 per paper?

A company considers introducing a new newspaper. Its direct competitor charges $0.25 at retail. The fixed cost charges to be $350,000 per month. The variable cost is $0.08 per copy, but advertising revenues of $0.05 per paper will be generated. To print the morning paper, the publisher has to purchase a new printing press, which will cost $620,000. The press machine will be depreciated according to a seven-year MACRS class. The press machine will be used for 10 years, at which time its salvage value would be about $100,000. Assume 365 issues per year, a 27% tax rate, and a 13% MARR. How many copies per day must be sold to break even at a retail selling price of $0.20 per paper?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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