Return on Software: Maximizing the Return on Your Software Investment

Chapter 10 Self-Study Questions

1.	After-tax MARR ≈ (0.15) (1 – 0.22) = 0.117 or 11.7%
3.	Before-tax MARR ≈ 0.20 / (1 – 0.35) = 0.308 or 30.8%

5.

They should be compared in the following order: A0, A2, A1, A6.

6.

Start with alternative A0 as the current best because it has the smallest initial investment. Choose A2 as the first candidate. Compute the differential cash-flow stream, A2 – A0. Because A0 is the do nothing alternative, the differential cash-flow stream is the same as the cash-flow stream for A.   A2 – A0 Initial investment $600,000 Annual income $400,000 Annual expenses $180,000 Salvage value $80,000 Compute the PW(MARR) for the differential cash-flow stream PW(MARR) = –$600k + $220k(P/A,15,8) + $80k (P/F,15,8) = –$600k + ($220k*4.4873) + ($80k*0.3269) ...