Problem:
MBC Corporation is considering investing in a new project. The project has a life of 10 years requires an initial investment of $180,000. The fixed operating cost is expected to be $36,000 and variable cost is expected to be 40% of sales. The required rate of return is 11%.
Q1. How much annual sales the project must produce to reach NPV break-even?
Q2. How much annual sales the project must produce to reach cash flow break-even?
Q3. Redo part (1) assuming there is a net salvage value of $18,000 at the end of the project's life.