FIN 370 help A Clearer path to student success/uophelp.com FIN 370 help A Clearer path to student success/uop | Page 29

13. Project Evaluation [LO1] Dog Up! Franks is looking at a new
sausage system with an installed cost of $540,000. This cost will be
depreciated straight-line to zero over the project’s five-year life, at the
end of which the sausage system can be scrapped for $80,000. The
sausage system will save the firm $170,000 per year in pretax operating
costs, and the system requires an initial investment in net working
capital of $29,000. If the tax rate is 34 percent and the discount rate is 10
percent, what is the NPV of this project?
• Ch. 11: Questions 1 & 7 (Questions and Problems section)
1. Calculating Costs and Break-Even [LO3] Night Shades, Inc. (NSI),
manufactures biotech sunglasses. The variable materials cost is $9.64
per unit, and the variable labor cost is $8.63 per unit.
a. What is the variable cost per unit?
b. Suppose NSI incurs fixed costs of $915,000 during a year in which
total production is 215,000 units. What are the total costs for the year?
c. If the selling price is $39.99 per unit, does NSI break even on a cash
basis? If depreciation is $465,000 per year, what is the accounting break-
even point?
7. Calculating Break-Even [LO3] In each of the following cases,
calculate the accounting break-even and the cash break-even points.
Ignore any tax effects in calculating the cash break-even.
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FIN 370 Week 3 Risk and Return Problem Sets (7-21,7-27,8-
19,8-21,9-33)