Calculate the NPV Break-Even Level of Sales for a Project

question 27

Multiple Choice

Calculate the NPV break-even level of sales for a project requiring an investment of $3,000,000 and providing as cash flows: .15 *sales less $250,000.Assume the project will generate these cash flows for 10 years and that the discount rate is 10 percent.

• A)$3,254,890
• B)$3,504,890
• C)$4,921,549
• D)$19,686,667 PV cash flows = investment
• 6)14457(.15 sales - 250,000) = $3,000,000
• )92169 sales - 1,536,142.50 = $3,000,000
• )92169 sales = $4,536,142.50

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Definitions:

Accounting Information

This refers to the data generated from financial accounting practices, used for making business decisions.

Cost Constraint

The Cost Constraint principle in accounting refers to the idea that the value of the information provided by financial reports should outweigh the cost of providing it.

Going Concern

The assumption that an entity will continue its operations in the foreseeable future and not go bankrupt or be forced to stop operations.

Financial Statements

Documents that provide an overview of a company's financial condition, including balance sheets, income statements, and cash flow statements.