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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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Phoniex University
Oct-2001 - Nov-2016
25.       Break-Even and Taxes   This problem concerns the effect of taxes on the various break-even measures.
a.  Show that, when we consider taxes, the general relationship between operating cash flow, OCF, and sales volume, Q, can be written as:
FC 1Â OCF 2 T 3 D Q 5Â Â Â Â Â Â Â Â Â 1 2 T Â Â Â Â Â Â
P 2 v
b.  Use the expression in part (a) to find the cash, accounting, and financial break- even points for the Wettway sailboat example in the chapter. Assume a 38 per- cent tax rate.
c.   In part (b), the accounting break-even should be the same as before. Why? Verify this algebraically.
Â
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