Dollenz Inc. just purchased a $220,000 machine to produce ice picks. The machine will be fully depreciated by the straight-line method over its five-year economic life. Each pick sells for $23. The variable cost per pick is $6, and the firm incurs fixed costs of $310,000 each year. The corporate tax rate for the company is 29 percent. The appropriate discount rate is 12 percent. What is the financial break-even point for the project?
OCF: N 5, I/Y 12, PV -220,000, FV 0, CMP PMT
OCF = [(P-VC)Q-FC] (1-T) + DT, Solve for Q
Q = 22,234 units