From the Information Below, Calculate the Impact of Discount Rate

question 15

Essay

From the information below, calculate the impact of discount rate changes on the present-value break-even point. Fixed costs are $2500/year. (Initial investment is $2000.)
Variable costs: $8/unit.
Depreciation: $500/year.
Price: $25/unit.
Initial Discount rate: 10%.
Project life: 4 years.
Tax rate: 34%.
If the discount rate were 15% and 5% what would be the present-value break-even points. How sensitive is the break-even to the discount rate change (show your results).

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