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:

Asset Account

An account on a company's balance sheet that represents the resources owned by the company that have economic value.

Liability Account

An account on the balance sheet indicating obligations or amounts owed to others that will require a future outlay of resources.

Recording

The process of documenting financial transactions in the accounting records.

Common Stock

A type of equity security that represents ownership in a corporation, granting holders voting rights and a share in the company's profits via dividends.