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# BREAK-EVEN ANALYSIS Based On Accounting Profit

Inputs
Fixed Costs

\$30,000

30

\$120,000
\$90,000

## Sales Revenue / Unit

\$6.00

Total Costs

\$60,000
Sales
Revenue
Accounting
Profit

\$30,000
Variable Costs / Unit

\$4.00

\$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

Data Table: Sensitivity of Costs, Revenues, and Acct. Profit to Unit Sales
Input Values for Unit Sales
Output Formulas:
\$0
5,000
10,000
15,000
20,000
25,000
Total Costs
\$90,000
\$50,000
\$70,000
\$90,000
\$110,000 \$130,000
Sales Revenue
\$90,000
\$30,000
\$60,000
\$90,000
\$120,000 \$150,000
Accounting Profit
\$0 (\$20,000) (\$10,000)
\$0
\$10,000 \$20,000

Total Costs

Sales
Revenue
Accounting
Profit

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

55.0%
2.0%
11.0%
35.0%

2.5%
11.2%
35.0%

40.0%
-15.0%
3.0%
11.4%
35.0%

25.0%
-15.0%
3.5%
11.6%
35.0%

5.0%
-20.0%
4.0%
11.8%
35.0%

-20.0%
-25.0%
4.0%
12.0%
35.0%

-50.0%
-30.0%
4.0%
12.2%
35.0%

13.2%
13.2%

14.0%
29.0%

14.7%
48.1%

15.5%
71.0%

16.3%
98.9%

16.5%
131.6%

16.7%
170.3%

2907
\$9.94
\$7.59
\$5,412

4070
\$10.24
\$7.81
\$5,574

5087
\$10.60
\$8.09
\$5,769

5342
\$11.02
\$8.41
\$6,000

4273
\$11.46
\$8.75
\$6,240

2137
\$11.92
\$9.10
\$6,490

Discounting
Discount Rate = Cost of Capital
Cumulative Discount Factor

0.0%

## Price or Cost / Unit

Unit Sales
Sales Revenue / Unit
Variable Cost / Unit
Cash Fixed Costs

1,875
\$9.70
\$7.40
\$5,280

## Cash Flow Forecasts

Sales Revenue
Variable Costs
Gross Margin
Cash Fixed Costs
Depreciation
Total Fixed Costs
Operating Profit
Taxes
Net Profit
Operating Cash Flow
Investment in Plant & Equip
Cash Flows

(\$11,350)
(\$11,350)

\$18,192
\$13,879
\$4,314

\$28,903
\$22,050
\$6,853

\$41,678
\$31,796
\$9,882

\$53,921
\$41,135
\$12,785

\$58,881
\$44,920
\$13,962

\$48,989
\$37,373
\$11,616

\$25,474
\$19,434
\$6,040

\$5,280
\$1,421
\$6,701

\$5,412
\$1,421
\$6,833

\$5,574
\$1,421
\$6,996

\$5,769
\$1,421
\$7,191

\$6,000
\$1,421
\$7,422

\$6,240
\$1,421
\$7,662

\$6,490
\$1,421
\$7,911

(\$2,388)
(\$836)
(\$1,552)

\$20
\$7
\$13

\$2,887
\$1,010
\$1,876

\$5,594
\$1,958
\$3,636

\$6,540
\$2,289
\$4,251

\$3,954
\$1,384
\$2,570

(\$1,871)
(\$655)
(\$1,216)

\$1,421
(\$131)

\$1,421
\$1,434

\$1,421
\$3,298

\$1,421
\$5,058

\$1,421
\$5,672

\$1,421
\$3,992

\$1,421
\$205

\$3,992

\$1,400
\$1,605

(\$131)

\$1,434

\$3,298

\$5,058

\$5,672

## Present Value of Each Cash Flow

Net Present Value

(\$11,350)
(\$0)

(\$115)

\$1,111

\$2,227

\$2,957

## Data Table: Sensitivity of Net Present Value to Year 1 Unit Sales

and Year 2 Sales Growth Rate
Output Formula:

\$2,852

\$1,723

\$594

(\$0)
45.0%
50.0%
55.0%
60.0%
65.0%

## Input Values for Year 2

Sales Growth Rate

1,700
(\$6,767)
(\$4,673)
(\$2,283)
\$442
\$3,548

1,900
2,100
2,300
(\$4,692) (\$2,618)
(\$543)
(\$2,352)
(\$31)
\$2,290
\$319
\$2,921
\$5,523
\$3,365
\$6,288
\$9,210
\$6,836 \$10,124 \$13,412

## NPV Break-Even Contour (Based On NPV = 0) Across

Year 1 Unit Sales And Year 2 Sales Growth Rate

\$15,000

NPV Break-Even
Contour

## Net Present Value

\$10,000

\$5,000
\$0
(\$5,000)
(\$10,000)
2,300
Year 1 Unit Sales

60.0%

65.0%

55.0%

2,100
1,900

50.0%
1,700
45.0%