your firm is considering manufacturing a new product the equipment nec
Your firm is considering manufacturing a new product. The equipment necessary to manufacture
this item costs $800,000. The equipment has a life of eight years and straight-line depreciation will
be used (with zero salvage value). The firm's tax rate is 30% and the required rate of return on this
risky project is 12%. Fixed costs are expected to be $130,000 per year and variable costs are
expected to be 30% of sales. Assume also that after the first year sales are expected to grow at a
5% rate per year. What is the year 1 sales revenue that the firm needs to achieve to break-even?
Please show all your work and round to 0 decimal places.
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