Gemstones Inc. is considering a new production line. The expected economic life of the project is 11 years. The project will generate sales and incur costs annually. Variable cost is 58% of sales. Total annual fixed costs, excluding depreciation, are $238,000. The initial outlay of the project is $1,367,000 and will be depreciated on a straight-line basis to zero at the end of the project. The company's tax rate is 40% and the discount rate is 7.80%. Calculate the NPV break-even level of sales. (Assume that the half-year rule does not apply.) a. $1,516,427 O b. $1,121,911 c. $2,190,092 d. $5,458,186 e. $1,319,169

Gemstones Inc. is considering a new production line. The expected economic life of the project is 11 years. The project will generate sales and incur costs annually. Variable cost is 58% of sales. Total annual fixed costs, excluding depreciation, are $238,000. The initial outlay of the project is $1,367,000 and will be depreciated on a straight-line basis to zero at the end of the project. The company's tax rate is 40% and the discount rate is 7.80%. Calculate the NPV break-even level of sales. (Assume that the half-year rule does not apply.) a. $1,516,427 O b. $1,121,911 c. $2,190,092 d. $5,458,186 e. $1,319,169

Name: Gemstones Inc. is considering a new production line. The expected eco
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Description: Gemstones Inc. is considering a new production line. The expected economic life of the project is 11 years. The projectwill generate sales and incur costs annually. Variable cost is 58% of sales. Total annual fixed costs, excludingdepreciation, are

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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