IE377 Review for 3rd Exam

Know the following:

Basic format of income statements and balance sheets

Know how to use the formulas in chapter 4 for calculating equivalent cash
flows when charts in the appendix dont have the required interest rate

Use Before Tax Analysis:

How to calculate PW, AW, FW, IRR of single investment to determine if

it is a good investment

How to pick best project from multiple investment alternatives using

PW, AW, FW

How to pick best project from multiple cost alternatives using PW, AW,
FW

How to use AW method when assuming repeatability for projects of

different lives

Taxes:

How to calculate effective tax rate

Calculate taxes owed given income amount and tax rate chart

Depreciation:

How to calculate depreciation using MACRS GDS tables only

Find Asset Class

# Years GDS

Factors

Determine Cost Basis

Book Value

Capital Gain on the Sale of an Asset MV BV = Gain/Loss

Capital Gain on the Sale of an Asset early: Use normal depreciation

for last year

After Tax Cash flows:

 How to calculate after tax cash flows and then calculate PW.be able
to create the chart with before tax cash flows, depreciation, taxable
Income, taxes, after tax cash flows, etc.

Inflation:

Calculate inflation given consumer price index (Ch 8)

Calculate Market and real interest rates (Ch 8)

Convert Real to actual dollars and vice versa (Ch 8) R$ = A$[1/(1+f)]

(k-b)

Calculate cash flows incorporating the affect of inflation (Ch 8)

Currency:

Convert from currency to currency using currency exchange rates

Break Even analysis:

Number of years break even analysis (Ch 11)

Other breakeven analysis (Ch 11)

Sensitivity analysis (Ch 11)

Multi-factor sensitivity analysis: Optimistic, Most likely, Pessimistic

scenarios (Ch 11)

Expected value given probability of optimistic, most likely, pessimistic

How to pick which investments should be chosen from multiple good

investments given the PW of each investment and a budget constraint (Ch
13)

Have an opinion on macro economic measurement:

Inflation

Currency rates

Money supply

Unemployment

Housing Starts

Auto Sales

Yield on 10 yr treasury note

Other measurements