# Question: you and your friends are thinking about starting a motorcycle...

###### Question details

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.

**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. Please explain each step in detail showing equations and
work how to arrive at this answer.