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ORIE_451_Homework__4_Textbook_Solutions

# ORIE_451_Homework__4_Textbook_Solutions - Solutions to...

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Solutions to Chapter 7 Problems 7-20 Income taxes owed (with venture) = \$50,000(0.15) + (\$7,000 + \$8,000)(0.25) = \$11,250 Income taxes owed (without venture) = \$50,000(0.15) + \$7,000(0.25) = \$9,250 7-27 Assume repeatability of investments over a common multiple of lives. Design S1 (A) (B) (C) = (A) - (B) (D) = -t (C) (E) = (A) + (D) EOY BTCF Depr TI T (40%) ATCF PW(10%) 0 - \$100,000 --- --- --- -\$100,000 -\$100,000 1 20,000 \$20,000 \$0 \$0 20,000 18,182 2 20,000 32,000 - 12,000 4,800 24,800 20,495 3 20,000 19,200 800 - 320 19,680 14,786 4 20,000 11,520 8,480 - 3,392 16,608 11,343 5 20,000 11,520 8,480 - 3,392 16,608 10,312 6 20,000 5,760 14,240 - 5,696 14,304 8,075 7 20,000 0 20,000 - 8,000 12,000 6,158 7 30,000 --- 30,000 -12,000 18,000 9,238 PW (10%) = -\$ 1,411 AW(10%) = PW (A/P,10%,7) = -\$1,411 (0.2054) = -\$290 Design S2 (A) (B) (C) = (A) - (B) (D) = -t (C) (E) = (A) + (D) EOY BTCF Depr TI T (40%) ATCF PW(10%) 0 -\$200,000 --- --- --- -\$200,000 -\$200,000 1 40,000 \$40,000 \$0 \$0 40,000 36,364 2 40,000 64,000 -24,000

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ORIE_451_Homework__4_Textbook_Solutions - Solutions to...

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