Based On Accounting Profit

Inputs

Fixed Costs $30,000 30

Sales Revenue / Unit $6.00 6

Variable Costs / Unit $4.00 4

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

Back solve for the Break-even Point using the Income StatementUnit SalesSales RevenueVariable CostsGross MarginFixed CostsAccounting Profit

BREAK-EVEN ANALYSIS

0 5,000 10,000 15,000 20,000 ($60,000)

($30,000)

$0

$30,000

$60,000

$90,000

$120,000

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

Total CostsSales RevenueAccounting Profit

Unit Sales

Data Table: Sensitivity of Costs, Revenues, and Acct. Profit to Unit SalesInput Values for Unit Sales

Output Formulas:Total CostsSales RevenueAccounting Profit

Based On NPV(in thousands of $)

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Key AssumptionsSales Growth Rate 55.0%Change in Sales Growth Rate -15.0% -15.0% -20.0% -25.0% -30.0%Inflation Rate 2.0% 2.5% 3.0% 3.5% 4.0% 4.0% 4.0%Real Cost of Capital 11.0% 11.2% 11.4% 11.6% 11.8% 12.0% 12.2%Tax Rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%

DiscountingDiscount Rate = Cost of Capital 13.2% 14.0% 14.7% 15.5% 16.3% 16.5% 16.7%Cumulative Discount Factor 0.0% 13.2% 29.0% 48.1% 71.0% 98.9% 131.6% 170.3%

Price or Cost / UnitUnit Sales 2,100 Sales Revenue / Unit $9.70 $9.94 $10.24 $10.60 $11.02 $11.46 $11.92 Variable Cost / Unit $7.40 $7.59 $7.81 $8.09 $8.41 $8.75 $9.10 Cash Fixed Costs $5,280 $5,412 $5,574 $5,769 $6,000 $6,240 $6,490

Cash Flow ForecastsSales Revenue $20,370 $0 $0 $0 $0 $0 $0 Variable Costs $15,540 $0 $0 $0 $0 $0 $0 Gross Margin $4,830 $0 $0 $0 $0 $0 $0

Cash Fixed Costs $5,280 $5,412 $5,574 $5,769 $6,000 $6,240 $6,490 Depreciation $1,421 $1,421 $1,421 $1,421 $1,421 $1,421 $1,421 Total Fixed Costs $6,701 $6,833 $6,996 $7,191 $7,422 $7,662 $7,911

Operating Profit ($1,871) ($6,833) ($6,996) ($7,191) ($7,422) ($7,662) ($7,911)Taxes ($655) ($2,392) ($2,449) ($2,517) ($2,598) ($2,682) ($2,769)Net Profit ($1,216) ($4,442) ($4,547) ($4,674) ($4,824) ($4,980) ($5,142)

Add Back Depreciation $1,421 $1,421 $1,421 $1,421 $1,421 $1,421 $1,421 Operating Cash Flow $205 ($3,020) ($3,126) ($3,253) ($3,403) ($3,559) ($3,721)

Investment in Plant & Equip ($11,350) $1,400

BREAK-EVEN ANALYSIS

Cash Flows ($11,350) $205 ($3,020) ($3,126) ($3,253) ($3,403) ($3,559) ($2,321)Present Value of Each Cash Flow ($11,350) $181 ($2,340) ($2,111) ($1,902) ($1,711) ($1,536) ($859)Net Present Value ($21,628)

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

and Year 2 Sales Growth RateOutput Formula: Input Values for Year 1 Unit SalesNet Present Value

Input Values for Year 2Sales Growth Rate

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

Column CColumn D

Column EColumn F

NPV Break-Even Contour (Based On NPV = 0) Across Year 1 Unit Sales And Year 2 Sales Growth Rate

Year 2 Sales Growth Rate

Net Present Value

Year 1 Unit Sales

NPV Break-EvenContour