A manufacturing plant and equipment cost $150 million and are estimated to have a lifetime of 25 year . Additional fixed costs per year are $4 million. Variable costs are $1.25 and price is set at $3.25.a- State annual profit/loss when annual volume, in million units, is(a) 10, (b) 2.5.b- If variable cost is expected to increase by 20% every 5 years, what should be the expected increase in price to have same break-even point for case 10 million units produced and is there a change in profit/loss calculated for same case in part (a).

A manufacturing plant and equipment cost $150 million and are estimated to have a lifetime of 25 year . Additional fixed costs per year are $4 million. Variable costs are $1.25 and price is set at $3.25.a- State annual profit/loss when annual volume, in million units, is(a) 10, (b) 2.5.b- If variable cost is expected to increase by 20% every 5 years, what should be the expected increase in price to have same break-even point for case 10 million units produced and is there a change in profit/loss calculated for same case in part (a).

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 4P

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