Return on Software: Maximizing the Return on Your Software Investment

Chapter 17 Self-Study Questions

1.	Effective after-tax interest rate = (1 – Effective income tax rate) * Loan interest rate = (1 – .30) * .07 = 0.049 = 4.9%
3.	The IRR on the municipal bond is 7%. The corporate bond's annual income of $900 is reduced by $216 in income taxes to $684. The after-tax IRR on the municipal bond is 6.84%. She's better off with the municipal bond.

6.

The depreciation schedule will be as follows: End of Year Depreciation Amount in Year Book Value at End of Year 0 — $60,000 1 0.40 * 60,000 = $24,000 $36,000 2 0.40 * 36,000 = $14,400 $21,600 3 0.40 * 21,600 = $8640 $12,960 4 0.40 * 12,960 = $5184 $7776 5 0.40 * 7776 = $3110 $4666 So the after-tax ...