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What is the annual depreciation on the machine

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Q.1 Three years ago, your firm purchased a Machine for Rs.52, 000. It is being depreciated straight line to a salvage value of Rs. 2,000 in two more years. If your firm sells the Machine today for Rs. 22,500, it will receive only Rs. 21,150 after taxes.

a. What is the annual depreciation on the machine?

b. What is the current book value of the machine?

c. What is your firm's marginal tax rate?

Q.2 Jim Korp designs game cartridges for home computers. His total fixed cost for designing a game package is $4,000. The cartridges the game is programmed into cost $4 each, and he sells them for $20 each. He currently sells 300 cartridges for each game he designs.

a. What are his break-even point, Net Operating Income and Degree of Operating leverage now?

b. If the price of a cartridge rises to $6 and he simultaneously raises the sales price to $22, what will the new break-even point, Net Operating Income and Degree of Operating leverage be?

Reference no: EM132516197

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