2a) life. If the MARR is 30t, which alterna selected? Solve the problem by Benef

ID: 2589508 • Letter: 2

Question

2a) life. If the MARR is 30t, which alterna selected? Solve the problem by Benefit cost method noting that the present worth of the benefit and the cost are as indicated below. (Hint: consider incremental benefit cost analysis in your solution and rank the alternatives in increasing order of cost) tive should be Cost $600 $500 $1000 $200 PW OF Benefit $2000 $1500$800$3000 2b) An unmarried engineer earns $100,000 for work done during the ar. The engineer claims one $3,000 exemption and estimated temized deduction of $20,000. If single people are automatically allowed $2,400 of deductions. Use the 201x tax tables to compute the Engineer's federal income tax liability under the following mutually exclusive conditions: i) If the engineer chooses to claims the standard deduction. ii) If the engineer chooses to itemize deductions Tax Tables (199x) (Approx.) · Up to $25,000 of taxable income Tax rate - 12% > $25,000 and less than $50,000 Tax rate 26% > $50,000 and less than $120,000 Tax rate 32%

Explanation / Answer

2a.

Incremental means the difference; suppose the incremental cost of “C to B” is (500 – 200 =) 300. Similarly, PW of incremental benefit of “A to D” is (3,000 – 2,000 =) 1,000.

The highest ratio gets the 1st rank.

Incremental B / C ratio is as below:

C to B

B to A

A to D

Incremental cost (C)

200

300

100

400

PW of incremental benefit (B)

800

700

500

1,000

B / C ratio

2.33

2.5

Rank

Answer: Alternative A should be selected, since it has the highest rank.