On june 1 of the current year, tab converted a machine from personal use to rental property. at the time of the conversion, the machine was worth $90,000. five years ago tab purchased the machine for $120,000. the machine is still encumbered by a $50,000 mortgage. what is the basis of the machine for cost recovery?
a. $70,000
b. $90,000
c. $120,000
d. $140,000
e. none of the above

Carlton industries is considering a new project that they plan to price at $74.00 per unit. the variable costs are estimated at $39.22 per unit and total fixed costs are estimated at $12,085. the initial investment required is $8,000 and the project has an estimated life of 4 years. the firm requires a return of 8 percent. ignore the effect of taxes. what is the degree of operating leverage at the financial break-even level of output?