Break Even Point

L.J.'s Toys Inc. just purchased a $250,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its five-year economic life. Each toy sells for $25. The variable cost per toy is $6, and the firm incurs fixed costs of $360,000 each year. The corporate tax rate for the company is 34 percent. The appropriate discount rate is 12 percent. What is the financial break-even point for the project?

 

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