A Breakeven procedure for a multi-period project

Abstract

Breakeven analysis is often limited to the analysis of a project with a short term time horizon. This paper presents a solution technique for the analysis of a project with a multi-period planning horizon. The solution procedure considers variations in production rates and variations in prices and costs. The solution methodology is used to find out how much output is to be produced for a projects life or sub-period, and how much time is taken for a project to breakeven. The proposed solution technique also provides insight to the relationship between NPV and breakeven quantity. This illustrates the difference of the solution methodology from conventional breakeven analysis. A sensitivity analysis in the procedure is as valid as the one in conventional breakeven analysis.