1. Lee Inc. purchases a $300,000 digital color printer, which will be fully depr

Question

1. Lee Inc. purchases a $300,000 digital color printer, which will be fully depreciated according to the straight-line method over its 5-year economic life, for a 4-year publishing project. The printer will be sold for $75,000 at the termination of the project. The variable costs are $30 per copy of the book, and annual fixed production costs are $80,000. An annual sales volume of 100,000 copies of the book is expected over the life of the project. The marginal tax rate is 35%, the inflation rate is 2%, and the real discount rate is 12%. This project requires an initial net working capital requirement of $50,000 of which 85% will be recovered at the termination of the project. Compute, in nominal term, (a) the annual break-even operating cash flow, and (b) use your answer for (a) to compute the financial break-even price of the book.

Explanation / Answer

I am not doing this because of the comment mentioned by someone:

Emem Paul commented

Please leave it for someone that understands to answer

This kind of behaviour is not at all acceptable. This is purely an insult of an individual.

Please make sure that this does not happen again.

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