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Question 1 (16 points) You consider investing in ARGAME INC. that develops online games making use of augmented reality technology. Selling price per game is
Question 1 (16 points) You consider investing in ARGAME INC. that develops online games making use of augmented reality technology. Selling price per game is USD40. Variable costs per game is USD8. Fixed cost per year is USD500,000. Depreciation of computer equipment per year is USD200,000. Tax rate is 15%. The discount rate for ARGAME INC. is 10% and the initial investment in computing equipment is USD 1,000,000. The project's economic life is five years. Assume the equipment is depreciated on a straight line basis over the project's life. 1a) What is the accounting breakeven level of sales volume for the project? (8 points) 1b) What is the financial breakeven level of sales volume for the project? (8 points)
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