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

question 3

Multiple Choice

Calculate the NPV break-even level of sales for a project requiring an investment of $3 million and providing annual cash flows equal to 15% of sales less $250,000.None of the initial investment is recoverable.Assume the project will generate these cash flows for 10 years and the discount rate is 10%.

• A) $3,254,890
• B) $3,504,890
• C) $4,921,575
• D) $1,686,667

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, used in statistics to quantify the degree to which individual data points differ from the mean value of the data set.

Sample Range

The difference between the largest and smallest values in a sample, indicating the spread of the data within the sample.

Process Mean

The average or mean value of a set of process measurements, representing its central tendency over time.

Assignable Variation

A variation in a process or product that can be traced to specific causes, as opposed to random or inherent variability.