Answer to Question #206357 in Management for Siyamthanda

Question

Sync Diamonds makes synthetic diamonds by treating carbon in a very 

technologically advanced and secret process. Each diamond can sell for R100. 

The material cost for a diamond is R40. The fixed costs incurred each year for 

factory upkeep and administrative expenses are R200 000. The machinery 

costs R1 million and it is depreciated straight-line over 10 years to a salvage 

value of zero.

i) What is the accounting break-even level of sales in terms of the number 

of diamonds sold?

ii) What is the NPV break-even level of sales assuming a tax rate of 35%, 

a 10-year project life, and a discount rate of 12%?

iii) Would the accounting break-even point in the first year of operation 

increase or decrease if the machinery were depreciated over a five-year 

period? Motivate your answer.

iv) Would the NPV break-even point increase or decrease if the machinery 

were depreciated over a five-year period?

Answer 1

Dear Siyamthanda, your question requires a lot of work, which neither of our experts is ready to perform for free. We advise you to convert it to a fully qualified order and we will try to help you. Please click the link below to proceed: Submit order