A company would like to purchase a $500,000 machine to produce a product. The will fully depreciate by the straight-line depreciation method over its four years useful life. It will sell for $50.00 The variable cost per is $12, and the fixed cost is $700,000 per year. Corporate tax rate is 40%. Required rate of return on investment is 15% (discount rate).
What is financial break-even point for the project?
Do you think that the project is a feasible investment? Why or why not?