A professional photographer who specializes in weddingrelate

A professional photographer who specializes in wedding-related activities paid $47,000 for equipment that will have a $2000 salvage value after 5 years. He estimates that his costs associated with each event amount to $65 per day. If he charges $250 per day for his services, how many days per year must he be employed in order to break even at an interest rate of 7% per year? The number of days required for break even is determined to be______ per year.

Solution

Solution:-

? Let X be the number of days for break-even.

We need to find annual worth to calculate the break-even point.

Break-even is the point that makes the revenues exactly equal to the costs.

0 = -$47,000(A/P, 7%, 5) + 2,000(A/F, 7%, 5) – 65X + 250X

0 = -$47,000*0.2438 + 2,000*0.1738 + 185X

0 = -$11,458.6 + 347.6 + 185X                                       347.6

0 = -$11,806.2 + 185X

185X = 11,806.2

X = 11,806.2 / 185

? X = 63.81 or 64 days.

? The number of days required for the photographer to break-even = 64 days.

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