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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Definitions:

Exclusive Bargaining Agent

A union that has been formally recognized to represent and negotiate on behalf of all employees in a bargaining unit.

Union Shop

A workplace where employment is contingent upon the employee joining the union within a certain period after being hired, ensuring labor union membership as part of employment terms.

Right to Sue

The legal entitlement for an individual or entity to bring a lawsuit against another party in court.

Right to Strike

The legal entitlement of workers to engage in strike actions as a means of bargaining and advocating for better working conditions or wages.