IE 3201 Chapter : Fund Eng Econ Ch9
Document Summary
9. 3: 4, 2, 10, 3, 7, 9, incremental cost. The outsourcing option would cost . 78 more for each unit. Note that the fixed cost of ,000 (or sh. 20 per unit based on 100,000 production volume) remains unchanged under either option. 9. 4: break-even price = . 80 - . 78 = . 02 per unit. Total marginal contribution: (0. 1) +(0. 5) +(0. 4) = . 70. ,200 marginal tax rate without the project = 34% marginal tax rate with the project = 34: average tax rates: without the project = ,000/,000. 9. 6: marginal tax rates with the project: Revenue depreciation taxable income combined income marginal rate. Comments: note that the marginal tax rates over the project life remain unchanged because the additional income from the new project is not large enough to push the company into a higher tax bracket. 9. 8) taxable income from the project during year 1: Taxable income , 000 , 000 , 000.
