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break even analysis

H

henry_b

New Member
I am comparing 2 net present values at 2 different interest rates. I am trying to find out at using today's interest rate, what the future interest rate will be that will result in a break even of zero. not sure if solver is the right tool or if this is compound problem?


Any assistance would be greatly appreciated.
 
Henry_B


Firstly, Welcome to the Chandoo.org Forums


When you say interest rate are you referring to the Required Return in the NPV Function or another variable in your model?


If it's anther variable within your model I would use the Goal Seek function

Goto the Data, What If functions and select Goal Seek

You want to set the NPV Cell to a value of 0 by changing the Interest rate cell


Finally in regards to NPV's this is always a good read.

http://www.tvmcalcs.com/blog/comments/the_npv_function_doesnt_calculate_net_present_value/
 
it is another variable in the model.


Using the current interest rate as the variable in this equation (periods and amounts are not constant in the NPV calc), the result should solve for the future interest rate if the breakeven is equal to zero. I will try the Goal Seek function.


Thanks for your help and I will look into this!
 
Hi all,
I am a newbie, and I amfinidng it difficult to post, so I apologize in advance if this is the wrong place to ask this question.
I searched the site and this seems to be the place to ask my question, but if not I would appreciate guidance on where to go...
So here goes....

I work in tourism and am considering opening up a new division, but I want to assess the risk involved and give myself some solid time frames...hence the breakeven analysis.

Problem is, I have almost zero concrete data with which to do the analysis:
Every tour is different, thus there is no way to determine the contribution margin...

I know we make a profit of approximately $170 for every $1000 sold, and I can figure out the fixed and variable costs, but I cant wrap my head around getting to the CM...let alone calculating the breakeven point.

Can anyone help me?
Thanks,
Ian
 
$170 profit on $1000 is bordering on break even, it would not take much to push you in to a loss, do you actually take a salary? Not sure what you are selling but when working out costings I worked to a rule of thumb which is 35% for materials, 35% for salary's and 30% for profit.
 
bobhc said:
$170 profit on $1000 is bordering on break even, it would not take much to push you in to a loss, do you actually tale a salary? Not sure what you are selling but when working out costings I worked to a rule of thumb which is 35% for materials, 35% for salary's and 30% for profit.
Click to expand...
Hi Bob,
Thanks for replying.
We are actually a very well established tour company selling all sorts of different bespoke tours for various budget levels.
Since there is no set "product" per se, all I have is that margin to work with.
I can figure out the other factors like:
  • Total fixed costs: rent, marketing and sales budget, etc.
  • Variable costs per unit: amount of my time/salary spent on the ventur
  • Sale price per unit: $1,000
  • Desired profits: $170 per thousand
Does that make sense or am I way off...?
Again, thanks fior the assist.
Ian
 
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