Final Fa2009 Solution

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Unformatted text preview: 534 0.502 39. What is the most Mercury should be willing to pay for the sidewalk installation? It should not pay more than its cost. $664,080 + $25,100 = $689,180 PV <$720,000> 664,080 25,100 <$30,820> 6A:002 Fall 2009 – Final Exam Page 19 40. Assume that Mercury pays income taxes and that its tax rate is 32%. Also assume that Mercury’s after tax discount rate is 6%. Compute Mercury’s annual depreciation tax shield. Annual depreciation is ($720,000 - $50,000) / 8 years = $83,750/year So, depreciation tax shield is 32% * $83,750/year = $26,800 per year 6A:002 Fall 2009 – Final Exam Page 20 Future Value of $1 Period 1 2 3 4 5 6 7 8 9 10 4% 1.040 1.082 1.125 1.170 1.217 1.265 1.316 1.369 1.423 1.480 5% 1.050 1.103 1.158 1.216 1.276 1.340 1.407 1.477 1.551 1.629 6% 1.060 1.124 1.191 1.262 1.338 1.419 1.504 1.594 1.689 1.791 7% 1.070 1.145 1.225 1.311 1.403 1.501 1.606 1.718 1.838 1.967 8% 1.080 1.166 1.260 1.360 1.469 1.587 1.714 1.851 1.999 2.159 9% 1.090 1.188 1.295 1.412 1.539 1.677 1.828 1.993 2.172 2.367 10% 1.100 1.210 1.331 1.464 1.611 1.772 1.949 2.144 2.358 2.594 11% 1.110 1.232 1.368 1.518 1.685 1.870 2.076 2.305 2.558 2.839 12% 1.120 1.254 1.405 1.574 1.762 1.974 2.211 2.476 2.773 3.106 13% 1.130 1.277 1.443 1.630 1.842 2.082 2.353 2.658 3.004 3.395 14% 1.140 1.300 1.482 1.689 1.925 2.195 2.502 2.853 3.252 3.707 10% 1.000 2.100 3.310 4.641 6.105 7.716 9.488 11.437 13.581 15.939 11% 1.000 2.110 3.342 4.710 6.228 7.913 9.783 11.859 14.164 16.722 12% 1.000 2.120 3.374 4.779 6.353 8.115 10.089 12.300 14.776 17.549 13% 1.000 2.130 3.407 4.850 6.480 8.322 10.404 12.757 15.415 18.419 14% 1.000 2.140 3.440 4.922 6.611 8.536 10.731 13.233 16.086 19.338 Future Value of a Series of $1 Cash Flows (Ordinary Annuity) Period 1 2 3 4 5 6 7 8 9 10 4% 1.000 2.040 3.122 4.247 5.417 6.634 7.899 9.215 10.584 12.007 5% 1.000 2.050 3.153 4.311 5.527 6.803 8.143 9.550 11.027 12.578 6% 1.000 2.060 3.184 4.375 5.637 6.975 8.394 9.898 11.492 13.181 7% 1.000 2.070 3....
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This note was uploaded on 09/29/2011 for the course 06A 002 taught by Professor Stuff during the Spring '11 term at University of Iowa.

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