Question

small notes if

necessary, I’m new to finance.

**6.1
You and your friends are thinking about starting a motorcycle company named Apple Valley Choppers. Your initial investment would be $500,000 for depreciable equipment, which should last 5 years, and your tax rate would be 40%. You could sell a chopper for $10,000, assuming your average variable cost per chopper is $3000, and assuming fixed costs, such as rent, utilities and salaries, would be $200,000 per year.**

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**A.
Accounting breakeven: How many choppers would you have to sell to break even, ignoring the costs of financing?**

=200,000/(10,000-3,000)

= 28.5714

Break even units = 29 units.

**B.
Financial breakeven: How many choppers would you have to sell to break even, if you required a 15% return? (Hint: Use the 15% as the discount rate and calculate net present value. In Excel, you may want to use the Goal Seek command, or simply use trial and error to find the correct amount.)**

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**C.
Assuming you could sell 60 choppers per year, what would be your IRR?**

**D.
Assuming you could sell 60 choppers per year, what would your selling price have to be to generate a net present value of $150,000 at a 15% discount rate? **

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**E.**