You are considering investing in a company that cultivates abalone for sale to l

Question

You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information:

The discount rate for the company is 15 percent, the initial investment in equipment is $805,000, and the project’s economic life is seven years. Assume the equipment is depreciated on a straight-line basis over the project’s life.

What is the accounting break-even level for the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

What is the financial break-even level for the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information:

Explanation / Answer

Ref Particulars Accounting Finance Sale price 34.5 34.5 Less: Variable cost -5.6 -5.6 A Contribution per unit 28.9 28.9 Fixed costs: Fixed costs 370000 370000 Depreciation 115000 115000 Interest(805000*15%) 120750 B Total 485000 605750 B/A BEP in units          16,782 20,960

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