Question 12.A.4: Calculating the EBITDA Break-Even Point PROBLEM: Calculate t...

Fundamentals of Corporate Finance

Calculating the EBITDA Break-Even Point
PROBLEM: Calculate the expected pretax operating cash flow (EBITDA) break-even number of house calls per month for the in-home computer-support business after six months.
APPROACH: Use Equation 12.4 to calculate EBITDA break-even for a project.

$EBITDA \ Break-even =\frac{FC}{Price-Unit \ VC}$ 12.4

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From Learning by Doing Application 12.1, we know that the monthly fixed costs (FC) are $3,000, the average revenue per house call (Price) is $70, and the variable cost per house call (Unit VC) is $20. Therefore, using Equation 12.4, we can calculate the EBITDA break-even as follows:

EBITDA \ Break-even =\frac{FC}{Price-Unit \ VC}=\frac{\$3,000}{\$70-\$20}=60 \ house \ calls \ per \ month

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