BREAK-EVEN ANALYSIS Based On Accounting Profit

Inputs
Fixed Costs

$150,000 Break-Even Point Based On Acct. Profit = 0
$30,000

30

$120,000
$90,000

Sales Revenue / Unit

$6.00

6

Total Costs

$60,000
Sales
Revenue
Accounting
Profit

$30,000
Variable Costs / Unit

$4.00

4

$0
($30,000)

($60,000)
0

Calculate the Break-even Point using the Formula
Break-even Point (Unit Sales)

15,000

Back solve for the Break-even Point using the Income Statement
Unit Sales
Sales Revenue
Variable Costs
Gross Margin
Fixed Costs
Accounting Profit

15,000
$90,000
$60,000
$30,000
$30,000
$0

5,000

10,000
Unit Sales

15,000

20,000

000 25.000 $50.000 $60.000) $0 $10. Revenues.000 .000 $110.000 Accounting Profit $0 ($20.000 $20.000 20.000 $150.000 Sales Revenue $90.000 $90.000 $120.000) ($10.000 $30. and Acct.000 10. Profit to Unit Sales Input Values for Unit Sales Output Formulas: $0 5.000 Total Costs $90.Data Table: Sensitivity of Costs.000 $130.000 $70.000 15.000 $90.

Total Costs Sales Revenue Accounting Profit .

0% 35.0% 40.298 $5.314 $28.954 $1.769 5342 $11.0% 2.280 $1.3% 98.796 $9.289 $4.240 $1.192 $13.70 $7.0% 4.421 $205 $3.421 $6.412 $1.050 $6.0% Price or Cost / Unit Unit Sales Sales Revenue / Unit Variable Cost / Unit Cash Fixed Costs 1.574 5087 $10.421 $7.191 $6.0% -50.40 $5.388) ($836) ($1.540 $2.216) $1.0% 12.958 $3.882 $53.5% 11.9% 16.616 $25.46 $8.0% -15.911 ($2.1% 15.0% 11.0% 11.0% 14.75 $6.09 $5.605 ($131) $1.384 $2.490 Discounting Discount Rate = Cost of Capital Cumulative Discount Factor 0.875 $9.058 $1.992 $1.434 $3.421 $7.636 $6.0% 12.5% 11.0% 35.6% 35.81 $5.41 $6.422 $6.421 $3.434 $6.421 $6.373 $11.989 $37.574 $1.887 $1.421 $5.92 $9.421 $5.570 ($1.490 $1.4% 35.0% -30.903 $22.6% 16.833 $5.040 $5.2% 35.921 $41.298 $1.7% 48.0% 4.058 $5.10 $6.594 $1.2% 13.5% 71.871) ($655) ($1.59 $5.0% -15.350) $18.000 4273 $11.962 $48.135 $12.0% 11.996 $5.474 $19.678 $31.010 $1.350) ($11.853 $41.251 $3.02 $8.0% 16.421 ($131) $1.421 $7.3% 2907 $9.552) $20 $7 $13 $2.280 Cash Flow Forecasts Sales Revenue Variable Costs Gross Margin Cash Fixed Costs Depreciation Total Fixed Costs Operating Profit Taxes Net Profit Add Back Depreciation Operating Cash Flow Investment in Plant & Equip Cash Flows ($11.0% -20.0% -20.8% 35.000 $1.240 2137 $11.879 $4.400 $1.7% 170.412 4070 $10.920 $13.0% 3.672 .60 $8.2% 14.0% -25.0% 5.701 $5.421 $6.0% 4.662 $6.94 $7.0% 25.769 $1.5% 131.0% 13.881 $44.992 $1.421 $3.BREAK-EVEN ANALYSIS Based On NPV (in thousands of $) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Key Assumptions Sales Growth Rate Change in Sales Growth Rate Inflation Rate Real Cost of Capital Tax Rate 55.24 $7.2% 35.0% 29.876 $5.672 $1.0% 3.0% 2.785 $58.421 $1.434 $1.421 $7.

852 $1.Present Value of Each Cash Flow Net Present Value ($11.227 $2.111 $2.723 $594 .957 Data Table: Sensitivity of Net Present Value to Year 1 Unit Sales and Year 2 Sales Growth Rate Output Formula: Input Values for Year 1 Unit Sales $2.350) ($0) ($115) $1.

000 $5.124 $13.352) ($31) $2.210 $6.000) ($10.290 $319 $2.300 Year 1 Unit Sales 60.0% 60.0% 55.0% 65.0% 55.900 2.0% 50.618) ($543) ($2.283) $442 $3.900 50.0% 2.700 ($6.000 NPV Break-Even Contour Net Present Value $10.692) ($2.288 $9.767) ($4.300 ($4.921 $5.836 $10.000 $0 ($5.100 2.523 $3.0% 65.0% Year 2 Sales Growth Rate .365 $6.548 1.100 1.700 45.000) 2.Net Present Value ($0) 45.0% 1.412 NPV Break-Even Contour (Based On NPV = 0) Across Year 1 Unit Sales And Year 2 Sales Growth Rate $15.673) ($2.0% Input Values for Year 2 Sales Growth Rate 1.

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