Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for $120. The materials cost for a standard diamond is $70. The fixed costs incurred each year for factory upkeep and administrative expenses are $215,000. The machinery costs $2.3 million and is depreciated straight-line over 10 years to a salvage value of zero.
a.What is the accounting break-even level of sales in terms of number of diamonds sold? Break-even sales
b.What is the NPV break-even level of sales assuming a tax rate of 40%, a 10-year project life, and a discount rate of 10%? (