The company ABC, L.C. manufactures some products with an average sales price of € 25/unit, with fixed annual costs of € 110,000. The average unit variable costs are € 5.
DEVELOP
a) At what volume of production will the threshold of profitability be reached?
b) Assuming that annual sales are estimated at 20,000 units, being the distribution evenly over a year, on what date will the break-even point be reached?
c) What would be the sales value or turnover corresponding to the threshold of profitability
2. The company Derabel, S.A. is considering buying a new machine for its production process. This project means an initial cost of € 200,000 and the machine is estimated to have a useful life of 5 years. The maximum productive capacity of the machine is 200,000 units per year. However, the first year it is expected that the activity will be 70% of the maximum installed capacity, reaching 100% from the second year.
During the first year, the unit sales price will be € 2.50, the unit variable cost € 1.50 and the fixed annual cost € 60,000, resulting in cumulative yearly increases of 4% in the price of the product sale, 3% on variable costs and 2% on fixed costs.
Also, it is assumed that:
With the above data, determine the Net Cash Flows after taxes of the project described above. Calculate the net absolute return.
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