Problem:
A firm is planning to supply a customer with silver coaster sets. The customer plans to purchase 10,000 sets annually for the next 4 years. The coaster sets will sell for $500 per set. Up front costs associated with this project are $600,000 and will have no value at the end of the project. Variable costs are $375 per coaster set and fixed costs are $300,000 per year. The project will require original net working capital of $450,000 that will be fully recovered in year 4. The firm operates with a 13% discount rate and a 36% marginal tax rate. The firm uses straight-line depreciation over the life of the project.
(a) Calculate the firms NPV breakeven points in sales. (please show all work and equations used)