1. If X is $5,000, R = 15% and BV is $50,000, what is AE? = 5000-(15%*50000) -2500 2. IfX is $25,000, R = 18% and BV is $125,000, what is AE? = 25000 - ( 18 %*125000) 2500 3. 4. Assume the firm in requirement 2 can divest $25,000 of unproductive capital with X falling by only $2,000. What is the new AE? = 25000-2000-( 18% *( 125000-25000)) 5. Assume the firm in requirement 2 can increase x to $30,000 by instituting some cost-cutting measures. What is the new AE? = 30000 - ( 18 %*125000) 7500 6. 5000 Assume the firm in requirement 2 can add a new division at a cost of $40,000, which will increase X by $7,600 per year. Would adding the new division increase AE? = 25000+7600 - ( 18% *( 125000+40000)) 2900 FALSE Assume the firm in requirement 1 can add a new division at a cost of $25,000, which will increase X by $3,500 per year. Would adding the new division increase AE? = 5000+3500-( 15%*50000+25000) -2750 FALSE

1. If X is 55,000,R=15% and eV is 550,000 , what is AE? =5000(15+50000) 2500 2. If X is $25,000,R=18% and BV is $125,000, what is AE ? =25000(18%+125000)2500 3. Assume the firm in re quirement 2 can increase x to $30,000 by instituting some cost-cutting meawres. What is the new AE? =30000(18%125000)7500 4. Assume the firm in requirement 2 can divest $25,000 of unproductive capltal with X falling by only $2,000. What is the new AE? =250002000(18(12500025000))5000 5. Assume the firm in requirement 2 can add a new divilon at a cost of $40,000, which will increase X by $7,600 per year. Would adding the new divislon increase AE? =25000+7600(18%(125000+40000)) 2900 FASE 6. Assume the firm in requirement 1 can add a new division at a cost of $25,000, which will increase X by $3,500 per year. Would adding the new division inerease AE? =5000+3500(15%5000025000) 2750 FALSE