Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $140. The materials cost for a standard diamond is $60. The fixed costs incurred each year for factory upkeep and administrative expenses are $214,000. The machinery costs $2.1 million and is depreciated straight-line over 10 years to a salvage value of zero.
What is the accounting break-even level of sales in terms of number of diamonds sold?
What is the NPV break-even level of sales assuming a tax rate of 35%, a 10-year project life, and a discount rate of 12%?