Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Wettway Sailboat Corporation is considering whether to launch its new Margo-class
sailboat. The selling price will be $48,000 per boat. The variable costs will be about half
that, or $27,000 per boat, and fixed costs will be $535,000 per year.
The total investment needed to undertake the project is $3,800,000. This amount will be
depreciated straight-line to zero over the 6-year life of the equipment. The salvage value
is zero, and there are no working capital consequences. Wettway has a required return
of 18 percent on new projects.
FC+
OCF-TCXD
1-TC
Q== P-v
Use the above expression to find the cash, accounting, and financial break-even points
for Wettway Sailboat. Assume a tax rate of 23 percent. (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
Cash break-even
Accounting break-even
Financial break-even
25.47
55.63
83.50
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Transcribed Image Text:Wettway Sailboat Corporation is considering whether to launch its new Margo-class sailboat. The selling price will be $48,000 per boat. The variable costs will be about half that, or $27,000 per boat, and fixed costs will be $535,000 per year. The total investment needed to undertake the project is $3,800,000. This amount will be depreciated straight-line to zero over the 6-year life of the equipment. The salvage value is zero, and there are no working capital consequences. Wettway has a required return of 18 percent on new projects. FC+ OCF-TCXD 1-TC Q== P-v Use the above expression to find the cash, accounting, and financial break-even points for Wettway Sailboat. Assume a tax rate of 23 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Cash break-even Accounting break-even Financial break-even 25.47 55.63 83.50
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