Break Even Sales

Suppose you invest $2,500 in an account bearing interest at the rate of 14% per year. What will the future value of your investment in six years?

The future value of the investment after six years will be $5,487.44.

Your best friend won the Wheel of Fortune in Las Vegas and has offered to give you $10,000 in five years, after he has collected his first million dollars. If you consider that if you had the money in your hand today, you would be able to get 12% annual interest, what is the present value of the gift?

I am a little confused by this question because if you had the money in your hand today, you would have not collected any interest, so you would have $10,000. However if you had collected the 12% interest on the $10,000 in 5 years, you would have $17,623.41.

In four years, you would like to purchase a villa in the Alps. You estimate that the property will cost you $52,500 when you are ready to buy. How much money would you need to invest each year at 6% interest so that you would have the $52,500?

You would need $41,500.

You have estimated that you will need $13,000 to complete your degree in three years. How much money do you need in your account at this moment to be able to cover the expense? Your account bears interest at 10% per year.

You will need $9,800 in your account,

You have decided to open a pizza parlor in your hometown. You plan to deliver your pizzas in a four mile radius from your shop. Your annual fixed expenses are $54,000. You charge $10 for a pizza and it costs you $6 to make and deliver each pizza. Do not calculate income taxes for the purpose of this exercise.

Using the contribution-margin approach, what is your break-even point in pizzas?

The price of each pizza to be sold at the pizza parlor is $10 and the variable costs per pizza are $6 so the break-even point in pizzas is $6.

What is the contribution-margin ratio?

CM = sales - variable expenses

$10-$6=$4/$10= 40%

Compute the break-even sales ratio using the...