Final_ISE460_SP08_sol

Final_ISE460_SP08_sol - ISE 460 FINAL 05/09/08 Spring 2008...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
ISE 460 Spring 2008 FINAL 05/09/08 DO YOUR WORK ON THIS HANDOUT. THIS WILL EXPEDITE THE GRADING OF THE PAPERS. NAME ________________________ FINAL SCORE _________________________ Read these instructions first before proceeding with the exam!! Please read the problems carefully and provide the information requested and only the information requested in each question. Use the minimum amount of work required to answer each question. Show all your work. Using scrap paper to rough out your responses will result in clearer and more easily gradable exams. The test is worth 125 points. (about 26% of your total grade for on campus, 29% for DEN). The test papers are to be handed in no later than 4:00 P.M. or two hours after we start, whichever is later. Approach the solutions of the problems with this time limit in mind It is unfair to your fellow students who hand in their papers on time to use more time than they had. Reference tables are distributed separately. Please dispose of them in a paper recycling container. The test is open notes and open book. Use your calculator or laptop if needed. If you want to ask a question, raise your hand and get my, or the TA’s attention. Making assumptions and stating them is usually much more time efficient than asking questions. The information given in each problem is sufficient to solve it. If you want to borrow your neighbor’s calculator, ask me to do it for you. No talking to your neighbors. Move on to the next problem if you are stuck. Good luck, I hope you all do well. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
ISE 460 Spring 2008 FINAL 05/09/08 Problem No. 1 Determine whether one would invest in the following three year project if one wanted to earn at least 15% annually on one’s investments. Include the effects of depreciation, inflation and income taxes. (40 points). I have attached a grid for your convenience. The initial investment is $250,000. 25% of this is borrowed at 8%. MACRS is three years and we will keep the equipment for three years. Annual expenses are $60,000 and income is $120,000 in the first year, $150,000 in year 2, $65,000 in year 3. Salvage value is $35,000. The annual inflation rate of 5% applies to expenses only, based on year 0. The company operates in a state with no income taxes. Do not invest! 2
Background image of page 2
ISE 460 Spring 2008 FINAL 05/09/08 Problem No. 2 This problem is based on the analyses shown on the two pages following the questions. The individual questions are independent of each other. a) What percentage of the funds has been borrowed? (2 points) 100,000/150,000 = 67% b) In the case with inflation, what will be the net present value if we borrowed an additional $25,000? (10 points) We have to calculate the payment, the part of the payment that is interest for each period, and the principal repayment portion. We then recalculate the taxes and the cash flow and find the NPV Payment = 125,000(A/P, 12%, 5) = 34,676
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/20/2009 for the course ISE 460 taught by Professor Bottlik during the Fall '06 term at USC.

Page1 / 15

Final_ISE460_SP08_sol - ISE 460 FINAL 05/09/08 Spring 2008...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online