Wettway Sailboat Corporation is considering whether to launch its new Margo-clas

Question

Wettway Sailboat Corporation is considering whether to launch its new Margo-class sailboat. The selling price will be $40,000 per boat. The variable costs will be about half that, or $20,000 per boat, and fixed costs will be $800,000 per year. The Base Case: The total investment needed to undertake the project is $3,000,000. This amount will be depreciated straight-line to zero over the five-year life of the equipment. The salvage value is zero, and there are no working capital consequences. Wettway has a 12 percent required return on new projects. 1formula16.mml Use the above expression to find cash, accounting and financial break-even points for Wettway Sailboat. Assume a tax rate of 38 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Cash break-even Accounting break-even Financial break-even ReferenceseBook & Resources WorksheetDifficulty: ChallengeSection: 11.2 Scenario and Other What-If Analyses
Wettway Sailboat Corporation is considering whether to launch its new Margo-class sailboat. The selling price will be $40,000 per boat. The variable costs will be about half that, or $20,000 per boat, and fixed costs will be $800,000 per year. The Base Case: The total investment needed to undertake the project is $3,000,000. This amount will be depreciated straight-line to zero over the five-year life of the equipment. The salvage value is zero, and there are no working capital consequences. Wettway has a 12 percent required return on new projects. 1formula16.mml Use the above expression to find cash, accounting and financial break-even points for Wettway Sailboat. Assume a tax rate of 38 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Cash break-even Accounting break-even Financial break-even ReferenceseBook & Resources WorksheetDifficulty: ChallengeSection: 11.2 Scenario and Other What-If Analyses
Wettway Sailboat Corporation is considering whether to launch its new Margo-class sailboat. The selling price will be $40,000 per boat. The variable costs will be about half that, or $20,000 per boat, and fixed costs will be $800,000 per year. The Base Case: The total investment needed to undertake the project is $3,000,000. This amount will be depreciated straight-line to zero over the five-year life of the equipment. The salvage value is zero, and there are no working capital consequences. Wettway has a 12 percent required return on new projects. 1formula16.mml Use the above expression to find cash, accounting and financial break-even points for Wettway Sailboat. Assume a tax rate of 38 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Cash break-even Accounting break-even Financial break-even ReferenceseBook & Resources WorksheetDifficulty: ChallengeSection: 11.2 Scenario and Other What-If Analyses

Explanation / Answer

Cash breakeven = Fixed cost / Contribution margin per unit

= $800000 / ($40000 - $20000)

= 40 units

Accounting breakeven = Fixed cost / contribution margin ratio

= $800000 / ($40000 - $20000)/$40000

= $1600000

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.