Problem
A project has the following estimated data: Price = $42 per unit; variable costs = $29 per unit; fixed costs = $16,000; required return = 10 percent; initial investment = $20,000; life = five years.
I. Ignoring the effect of taxes, what is the accounting break-even quantity?
II. What is the cash break-even quantity?
III. What is the financial break-even quantity?
IV. What is the degree of operating leverage at the financial break-even level of output?