Dime-a-Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $170. The materials cost for a synthetic diamond is $110. The fixed costs incurred each year for factory upkeep and administrative expenses are $1,250,000. The machinery costs $1.21 million and is depreciated straight-line over 10 years to a salvage value of zero. a. What is the accounting break-even level of sales in terms of number of diamonds sold? Answer is complete but not entirely correct. 20,833 diamonds Accounting break-even b. What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%? Note: Do not round intermediate calculations. Round your final answer to the nearest whole number.
Dime-a-Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $170. The materials cost for a synthetic diamond is $110. The fixed costs incurred each year for factory upkeep and administrative expenses are $1,250,000. The machinery costs $1.21 million and is depreciated straight-line over 10 years to a salvage value of zero. a. What is the accounting break-even level of sales in terms of number of diamonds sold? Answer is complete but not entirely correct. 20,833 diamonds Accounting break-even b. What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%? Note: Do not round intermediate calculations. Round your final answer to the nearest whole number.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Dime-a-Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be
sold for $170. The materials cost for a synthetic diamond is $110. The fixed costs incurred each
year for factory upkeep and administrative expenses are $1,250,000. The machinery costs $1.21
million and is depreciated straight-line over 10 years to a salvage value of zero.
a. What is the accounting break-even level of sales in terms of number of diamonds sold?
Answer is complete but not entirely correct.
20,833 diamonds
Accounting break-even
b. What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project
life, and a discount rate of 12%?
Note: Do not round intermediate calculations. Round your final answer to the nearest
whole number.
Answer is complete but not entirely correct.
13,489 diamonds
NPV break-even level of sales
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