Breakeven analysis is used to break down the cost per unit into its variable and fixed components. The price minus the variable costs gives the amount that will be available from a sale to either contribute to paying for fixed costs or contribute to the company's profit. When this relationship is established, it can be used to determine the number of units that need to be sold to meet the company's goals, or what price at a given volume needs to be charged to cover costs. If the expected volume and price are already known, then breakeven analysis can show whether or not a project will be profitable in the short and long run.
An automobile company and a utility company have very large fixed costs. However, an electrical company will sell many units at a very standard price. An automobile will sell fewer units at a wide range of prices, not all of which are perfectly determinable. The utility company will have less risk associated with leverage than a an automobile company because the per unit cost will be smaller and the likelihood of recovering the amount of money needed to service the debt is greater.
The breakeven point for a low-debt project is lower than that of a high-debt project because the debt service represents a fixed cost. The same holds true for a low-capital project, the fixed cost is lower and requires the contribution margin of fewer product sales are required to cover the fixed cost than if the project required a large investment in capital.
However, it may not be possible to produce enough products, or indeed any products, without expensive equipment. Likewise if the labor required to produce an item by had is very costly, the breakeven point might actually be at a higher number of units than if the company borrowed money to purchase automating equipment.
Any leverage increases the risk of a project because the amount of revenue needed for the company or project to break even is higher. Furthermore...