Breakeven Yield
Categories: Bonds, Accounting
The rate of return required on an investment or sale required to exactly offset the associated costs.
Patti sells peppermint candies to the elderly residents of a local nursing home. It costs Patti $10 for the ingredients to make a batch of 100 candies, and $5 in gas to get to/from the home.
Knowing that the residents have limited incomes, Patti only charges them enough to generate a breakeven yield of $0.15 per piece of candy. Patti then invests her proceeds in an actively managed investment fund that charges fees equal to 70% of invested funds. Patti is in the 30% income tax bracket. Patti likes wasting her time.