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Chartreuse Co. has purchased a brand new machine to produce its High Flight line of shoes. The

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Chartreuse Co. has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of six years. The depreciation schedule for the machine is straight-line with no salvage value. The machine costs $735,000. The sales price per pair of shoes is $94, while the variable cost is $26. Fixed costs of $475,000 per year are attributed to the machine. The corporate tax rate is 23 percent and the appropriate discount rate is 12 percent. What is the financial break-even point?

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When calculating the financial breakeven point we express the initial investment as ...View the full answer


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Corporate Finance Core Principles And Applications

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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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