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Problem

Modern Artifacts can produce keepsakes that will be sold for $80 each. Non-depreciated fixed costs are $1,000 per year and variable costs are $60 per unit.

a. If the project requires an initial investment of $3000 and is expected to last for 5 years and the firm pays no taxes, what are the accounting and NPV breakeven levels of sales? The initial investment will be depreciated straight-line over 5 years to a final value of zero, and the discount rate is 10 percent.

b. How do your answers change if the firm's tax rate is 40 percent?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92753510

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