discussion10_ise460_october_31st

# discussion10_ise460_october_31st - LOGO Welcome to ISE-460...

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LOGO www.nordr Welcome to ISE-460 Class Discussion 9 October 26th, 2007 TA: Paul

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TA: Bill Jia / Fall 2006 What have we learnt before? What are we learning now?       Are you lost already? TA: Paul 2007 Fall
TA: Bill Jia / Fall 2006 Present Worth (Ch5) Annual worth (Ch6) Rate of Return (Ch7) Outline of the text Financial Statement, Ratio (Ch 2), Cost (Ch 8) Earning power of money Interest (Ch 3, 4) Investment Evaluation (accept/reject? Choose which) Replacement (Ch14) Income/Cash Flow Statement (Ch 10) Inflation (Ch 11) Depreciation (Ch 9) Taxes (Ch 9) Five Cash Flow Series (Ch 3) TA: Paul 2007 Fall Time Value Of Money

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TA: Bill Jia / Fall 2006 Why we need to learn   DEPRECIATION   ? Because we want to calculate  TAX  Investment is allocated into the whole life of the project ——  DEPRECIATION Count  DEPRECIATION  in, we get  TAXABLE INCOME TAX  =  TAXABLE INCOME  × TAX   RATE TAXABLE INCOME   –  TAX  NET   INCOME (this is not the real cash we spend or receive, it stays just in the statement) TA: Paul 2007 Fall What is NET  INCOIME used for? Maybe used to  calculate  NPV/AE/IRR ???
TA: Bill Jia / Fall 2006 What do we do with   NET   INCOME   ? We add  DEPRECIATION  back We count in  INVESTMENT   (we didn’t consider that when calculating net income) NET   CASH   FLOW   (this is the real cash we spend or recieve)         = DEPRECIATION +  NET   INCOME +  INVESTMENT So we get  NET   CASH   FLOW What can we do with  NET   CASH   FLOW? We use them to calculate  NPV/AE/IRR , and so use them for  PROJECT  EVALUATION This is the whole idea of these Chapters! TA: Paul 2007 Fall

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TA: Bill Jia / Fall 2006 The assignments are very good,                  they are helping us to to understand: COST BASIS : (Concept/Caculation)  Problem #1 DEPRECIATION METHODS Straight-Line (SL)    ——  Problem #2, #4 Double Declining-Balance(DDB) ——  Problem #4 DDB switch to SL ——  Problem #4 MACRS ——  Problem #4 How MACRS is devised? ——  Problem #3 TAX   ——  Problem #5 TA: Paul 2007 Fall
TA: Bill Jia / Fall 2006 Problem #1: How to calculate COST BASIS ? Please see 9.2.2 (P434)   Example 9.1, 9.2 What is used for depreciation?? What is to be capitalized? only Investment? COST BASIS !  TA: Paul 2007 Fall

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ENGINEERING ECONOMICS ISE460 SESSION 17 CHAPTER 9, Tuesday, October 23, 2007 Geza P. Bottlik Page 8 COST BASIS COST BASIS IS: THE TOTAL COST OF THE ASSET OVER ITS LIFE INITIAL INVESTMENT FREIGHT SITE PREPARATION INSTALLATION TRADE-IN ALLOWANCE OF THE PREVIOUS EQUIPMENT IT DOES NOT INCLUDE OPERATING EXPENSES
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discussion10_ise460_october_31st - LOGO Welcome to ISE-460...

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