You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information: Sales price per abalone = $44.70 Variable costs per abalone = $11.30 Fixed costs per year = $502,000 Depreciation per year = $103,000 Tax rate = 22%
The discount rate for the company is 14 percent, the initial investment in equipment is $927,000, and the project’s economic life is 9 years. Assume the equipment is depreciated on a straight-line basis over the project’s life and has no salvage value. a.
What is the accounting break-even level for the project? b.
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What is the financial break-even level for the project?