As we know that the net present value (NPV) of an investment proposal is equal to
the present value of its annual net cash ows less the investment’s initial outlay.
Since the NPV in our case is greater than zero, the project will be accepted according
to the rule of accept-reject criterion : NPV>=0 “Accept the project” or NPV<0 “Reject
the project”. A0er we known the new project is probably to be developed, Break–
even analysis is one of important and accepted tool within the realm of business
decision making. It is because the break-even model enables us to determine the
quantity of output that must be sold to cover all operating costs, as distinct from
financial costs that will be achieved at various output levels.
To implement the break-even model, there are a several essential elements to be
considered in the project: Fixed cost, Variable cost, Total revenue and volume of
output. The total revenue means sales dollars and is equal to the selling price per
unit multiplied by the quantity sold. The volume of output refers to the level of our
operations and is indicated as a unit of quantity. The relationship of those elements
and their output are summarised in the table which a7ached into the excel 3le
named “Revenue & Cost table”. According to the data in the table and together with
the tax data, the income statement has been generated(refer to the a7ached excel
