Visit https://testbankdeal.

com to download the full version and

explore more testbank or solutions manual

Engineering Economy 8th Edition Blank Solutions

Manual

_____ Click the link below to download _____

https://testbankdeal.com/product/engineering-economy-8th-
edition-blank-solutions-manual/

Explore and download more testbank or solutions manual at testbankdeal.com

Here are some recommended products that we believe you will be
interested in. You can click the link to download.

Engineering Economy 7th Edition Blank Solutions Manual

https://testbankdeal.com/product/engineering-economy-7th-edition-
blank-solutions-manual/

Basics of Engineering Economy 2nd Edition Blank Solutions

Manual

https://testbankdeal.com/product/basics-of-engineering-economy-2nd-
edition-blank-solutions-manual/

Engineering Economy 16th Edition Sullivan Solutions Manual

https://testbankdeal.com/product/engineering-economy-16th-edition-
sullivan-solutions-manual/

Introductory Electronic Devices and Circuits Electron Flow

Version 7th Edition Paynter Test Bank

https://testbankdeal.com/product/introductory-electronic-devices-and-
circuits-electron-flow-version-7th-edition-paynter-test-bank/
Fundamentals of Physics Extended 10th Edition Halliday
Test Bank

https://testbankdeal.com/product/fundamentals-of-physics-
extended-10th-edition-halliday-test-bank/

International Economics 15th Edition Robert Carbaugh

Solutions Manual

https://testbankdeal.com/product/international-economics-15th-edition-
robert-carbaugh-solutions-manual/

Americas History Concise Edition 9th Edition Edwards Test

Bank

https://testbankdeal.com/product/americas-history-concise-edition-9th-
edition-edwards-test-bank/

Organic Chemistry 7th Edition Mcmurry Solutions Manual

https://testbankdeal.com/product/organic-chemistry-7th-edition-
mcmurry-solutions-manual/

Statistics for the Behavioral Sciences 3rd Edition

Privitera Solutions Manual

https://testbankdeal.com/product/statistics-for-the-behavioral-
sciences-3rd-edition-privitera-solutions-manual/
Payroll Accounting 2016 26th Edition Bieg Solutions Manual

https://testbankdeal.com/product/payroll-accounting-2016-26th-edition-
bieg-solutions-manual/
 Engineering Economy, 8th edition
Leland Blank and Anthony Tarquin

Chapter 10
Project Financing and Noneconomic Attributes

Working with MARR

10.1 The two primary sources of capital are debt and equity. Debt capital refers to capital
obtained by borrowing from outside the company. Equity capital represents funds obtained
from within the organization, such as owners’ funds, retained earnings, etc.

10.2 The project that is not undertaken due to lack of funds, say B, that has a ROR of i*B, in
effect sets the MARR, because it’s rate of return is a lost opportunity rate of return.

10.3 (a) Higher risk - raise

(b) Company wants to expand into a competitor’s area - lower
(c) Higher corporate taxes - raise
(d) Limited availability of capital - raise
(e) Increased market interest rates - raise
(f) Government imposition of price controls – lower

10.4 12 - 8 = 4% per year

10.5 Before-tax MARR = 0.15/(1 – 0.38)

= 0.242 (24.2%)

10.6 (a) Effective tax rate = 0.12 + (0.88)(0.22) = 0.314

Before-tax MARR = 0.15/(1 – 0.314)

= 0.218 (21.8%)

(b) Bid amount = 7.2 million/(1 – 0.218)

= $9.2 million

10.7 (a) Bonds are debt financing

(b) Stocks are always equity
(c) Equity
(d) Equity loans are debt financing, like house mortgage loans

10.8 (a) ROR measure: Select projects A, E and C to total $21 million. Opportunity cost is
12.8%, the ROR of project B

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

1
 PW measure: Select projects A, E, C and D to total $29 million. Opportunity cost is
12.8%, the ROR of project B

(b) Since 12.8% is less than a MARR of 15%, any project with ROR < 15% should be
eliminated initially. Projects B and D should not be considered.

10.9 (a) MARR = WACC + required return = 8% + 4% = 12%. The 3% risk factor is
considered after the project is evaluated, not added to the MARR

(b) Evaluate the project and determine the ROR. If it is 15% and Tom rejects the proposal,
his MARR is effectively 15% per year.

D-E Mix and WACC

10.10 (a) Calculate the two WACC values.

WACC1 = 0.6(12%) + 0.4(9%) = 10.8%

WACC2 = 0.2(12%) + 0.8(12.5%) = 12.4%

Use option 1 with a D-E mix of 40%-60%

(b) Let x1 and x2 be the maximum costs of debt capital

Option 1: 10% = 0.6(12%) + 0.4(x1)

x1 = [10% - 0.6(12%)]/0.4
= 7%

Debt capital cost would have to decrease from 9% to 7%

Option 2: 10% = 0.2(12%) + 0.8(x2)

x2 = [10% - 0.2(12%)]/0.8
= 9.5%

Debt capital cost would have to decrease from 12.5% to 9.5%

10.11 Debt portion of $15 million represents 40% of the total

Total amount of financing = 15,000,000/0.40 = $37,500,000

10.12 Debt: 16 + 30 = $46 million

Equity: 4 + 12 = $16 million

% debt = 46/(46 + 16) = 74%

% equity = 16/62 = 26%
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

2
 D-E mix is 74%-26%

10.13 WACC = cost of debt capital + cost of equity capital

= (0.4)[0.667(8%) + 0.333(10%)] + (0.6)[(0.4)(5%) + (0.6)(9%)]
= 0.4[8.667%] + 0.6 [7.4%]
= 7.91%

10.14 Compute the WACC for each D-E mix. For example, the 70-30 D-E mix results in

WACC = 0.7(13%) + 0.3(7.8%)

= 11.44%

D-E Mix WACC, %

100-0 14.50
70-30 11.44
65-35 10.53
50-50 9.70
35-65 9.84
20-80 12.48
0-100 12.50

D-E mix of 50%-50% has the lowest WACC value.

10.15 Solve for X, the cost of debt capital

WACC = 10.7% = 0.8(6%) + (1-0.8)(X)

X = (10.7 – 4.8)/0.2
= 29.5%

The rate of 29.5% for debt capital (loans, bonds, etc.) seems very high.

10.16 Company’s equity = 30(0.35) = $10.5 million

Return on equity = (4/10.5)(100%) = 38.1%

10.17 (a) Business: all debt; D-E = 100%-0%

Engineer: 50% debt; D-E is 50%-50%

(b) Business: FW = 30,000(F/P,4%,1)

= 30,000(1.04)
= $31,200

Check is for $31,200

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

3
 Engineer: FW = 25,000 + 25,000(F/P,7%,1)
= 25,000 + 26,750
= $51,750

Two checks: $25,000 to parents and $26,750 to credit union

(c) Business: 4%
Engineer: 0.5(0%) + 0.5(7%) = 3.5% or (1750/50,000)*100 = 3.5%

10.18 First Engineering: D-E mix = 87/(175-87) = 87/88

Basically, a 50-50 D-E mix

Midwest Development: D-E mix = (175-62)/62 = 113/62

Approximately, a 65-35 D-E mix

10.19 Total financing = 3 + 4 + 6 = $13 million

WACC = (3/13)(8%) + (4/13)(9%) + (6/13)(11%)

= 1.85% + 2.77% + 5.07%
= 9.69%

10.20 Before-taxes:

WACC = 0.4(9%) + 0.6(12%) = 10.8% per year

After-tax approximation: Insert Equation [10.4] into the before-tax WACC relation.

After-tax WACC = (equity)(equity rate) + (debt)(before-tax debt rate)(1–Te)

= 0.4(9%) + 0.6(12%)(1-0.35)
= 8.28% per year

The tax advantage reduces the WACC from 10.8% to 8.28% per year

10.21 (a) Determine the after-tax cost of debt capital, Equation [10.4], and WACC

After-tax cost of debt capital = 10(1 - 0.36) = 6.4%

After-tax WACC = 0.35(6.4%) + 0.65(14.5%) = 11.665%

Interest charged to revenue for the project:

14.0 million(0.11665) = $1,633,100

(b) After-tax WACC = 0.25(14.5%) + 0.75(6.4%)

= 8.425%

Interest charged to revenue for the project:

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

4
 14.0 million(0.08425) = $1,179,500

As more and more capital is borrowed, the company risks higher loan rates and
owns less and less of itself. Debt capital (loans) becomes more expensive and
harder to acquire.

Cost of Debt Capital

10.22 (a) Before-tax cost of debt capital is 8%

(b) Interest = 4,000,000(0.08)

= $320,000

Tax savings = 320,000(0.39)

= $124,800

Before-tax repayment = 4,000,000(1.08) = $4,320,000

After tax repayment = 4,320,000 – 124,800 = $4,195,200

0 = 4,000,000 – 4,195,200(P/F,i*,1)

i* = 0.488 (4.88%)

After-tax cost = 4.88%

(c) Approximation using Equation [10.4] is

After-tax cost of debt capital = 8%(1 - 0.39) = 0.488 (4.88%)

In this case, the approximation is the same as the actual calculated result

10.23 (a) 0 = 2,800,000 – 196,000(P/A,i*,10) – 2,800,000(P/F,i*,10)

i* = 7.0% (RATE function)

Before-tax cost of debt capital is 7.0% per year

(b) NCF is determined using Equation [10.6]

NCF = 196,000(1 - 0.33) = $131,320

0 = 2,800,000 - (131,320)(P/A,i*,10) - 2,800,000

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

5
 i* = 4.69% (RATE function)

After-tax cost of debt capital is 4.69% per year

10.24 Before-tax bond annual interest = 6 million*0.06 = $360,000

Annual bond interest NCF = 360,000(1 – 0.4) = $216,000

Find i* using a PW relation

0 = 6,000,000 - 216,000(P/A,i*,10) - 6,000,000(P/F,i*,10)

i* = 3.60% per year

(Note: The correct answer is also obtained if the before-tax debt cost of 6% is used to
estimate the after-tax debt cost of 6%(1 - 0.4) = 3.60% from Equation [10.4]).
10.25 (a) 0 = 19,000,000 – 1,200,000(P/A,i*,15) – 20,000,000(P/F,i*,15)

i* = 6.53% (spreadsheet)

Before-tax cost of debt capital is 6.53% per year

(b) Tax savings = 1,200,000(0.29) = $348,000

NCF = 1,200,000 - 348,000 = $852,000

0 = 19,000,000 - 852,000(P/A,i*,15) – 20,000,000

i* = 4.73% (spreadsheet)

After-tax cost of debt capital is 4.73% per year

(c) Before taxes: = RATE(15,-1200000,19000000,-20000000) displays 6.53%

After taxes: = RATE(15,-1200000*(1-0.29),19000000,-20000000) displays 4.73%

10.26 (a) Bank loan

Annual loan payment = 800,000(A/P,8%,8)
= 800,000(0.17401)
= $139,208

Principal payment = 800,000/8 = $100,000

Annual interest = 139,208 – 100,000 = $39,208
Tax saving = 39,208(0.40) = $15,683
Effective interest payment = 39,208 – 15,683 = $23,525
Effective annual payment = 23,525 + 100,000 = $123,525

The AW-based i* relation is:

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

6
 0 = 800,000(A/P,i*,8) - 123,525
(A/P,i*,8) = 0.15441
i* = 4.95% (RATE function)

Bond issue
Annual bond dividend = 800,000(0.06) = $48,000
Tax saving = 48,000(0.40) = $19,200
Effective bond dividend = 48,000 – 19,200 = $28,800

The AW-based i* relation is:

0 = 800,000(A/P,i*,10) - 28,800 - 800,000(A/F,i*,10)

i* = 3.60% (RATE or IRR function)

Bond financing is cheaper.

(b) Before taxes: bonds cost 6% per year, which is less than the 8% loan. The answer
before taxes is the same as that after taxes.

10.27 (a) Face value = $2,500,000 = $2,577,320

0.97

(b) Bond interest = 0.042(2,577,320) = $27,062 every 3 months

4
Dividend quarterly net cash flow = $27,062(1 - 0.35) = $17,590

The rate of return equation per 3-months over 20(4) quarters is:

0 = 2,500,000 – 17,590(P/A,i*,80) – 2,577,320(P/F,i*,80)

Factor solution:

By trial and error, i* is between 0.5% and 0.75% per quarter. Tables provide values
for 75 and 84 years. Use the formula for n = 80

i = 0.5%:
2,500,000 – 17,590[(1.005)80-1/0.005(1.005)80 ] – 2,577,320(1/(1.005)80
2,500,000 – 17,590[65.8023] – 2,577,320(0.6710)
$-386.84 < 0; i* > 0.5%

i = 0.75%:
2,500,000 – 17,590[(1.0075) -1/0.0075(1.0075) ] – 2,577,320(1/(1.0075)
80 80 80

2,500,000 – 17,590[59.9944] – 2,577,320(0.5500)

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

7
 $27.17 > 0; i* < 0.75%

By interpolation,

i* = 0.00734 per quarter (0.734% per quarter)

Annual nominal i* = (0.734)(4) = 2.936% per year

Annual effective i* = (1.00734)4 – 1 = 0.0297 (2.97% per year)

Spreadsheet solution:

Function: = RATE(80,-17590,2500000,-2577320) displays i* = 0.732% per quarter

Nominal i* = (0.732)(4) = 2.928% per year

= EFFECT(2.928%,4) displays 2.96% per year

Cost of Equity Capital

10.28 Debt financing has the lower after-tax cost because interest paid for corporate debt is
deductible, but dividends paid to stockholders for equity capital are not.

10.29 (a) Money raised = 2,700,000(54)(0.90)

= $131,220,000

(b) Cost of Equity financing = 3.24/(54)(0.9)

= 0.0666 (6.67%)

10.30 (a) Re = 1.90/80 + 0.03

= 0.05375 (5.38%)

(b) Re = 1.90/80*0.95 + 0.01

= 0.035 (3.5%)

10.31 Let x = dividend growth rate

0.08 = 4.76/140 + x
x = 0.046 (4.6%)

10.32 Re = 0.035 + 0.92(0.05)

= 0.081 (8.1%)

10.33 Re = 0.032 + 1.41(0.038)

= 0.0856 (8.56%)

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

8
10.34 (a) Dividend method: Re = DV1/P + g
= 0.93/18.80 + 0.015
= 0.0644 (6.44%)

(b) CAPM: (The return values are in percent)

Re = Rf + β(Rm - Rf)
= 2.0 + 1.19(4.95 – 2.0)
= 5.51%

CAPM estimate of cost of equity capital is lower.

(c) Set dividend method Re = 0.0551 and solve for DV1

0.0551 = DV1/18.80 + 0.015

DV1 = 18.80(0.040)
= $0.754

For any initial dividend less than 75.4¢ per share, the CAPM estimate will be larger.

10.35 Last year CAPM computation: Re = 4.0 + 1.10(5.1 – 4.0)

= 4.0 + 1.21 = 5.21%

This year CAPM computation: Re = 3.9 + 1.18(5.1 – 3.9)

= 3.9 + 1.42 = 5.32%

Equity costs slightly more this year in part because the company’s stock became more
volatile based on an increase in beta. Also, the safe return rate decreased 0.1% in the
switch from U.S. to Euro bonds.

10.36 Total equity and debt fund is $15 million.

Equity WACC = (retained earnings fraction)(cost) + (stock fraction)(cost)

= (4/15)(7.4%) + (6/15)(4.8%)
= 3.893%

Debt WACC = (5/15)(9.8%)

= 3.267%

WACC = 3.893 + 3.267

= 7.16%

MARR = WACC + 4%
= 7.16 + 4.0
= 11.16%

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

9
Different D-E Mixes

10.37 A large D-E mix over time is not healthy financially because this indicates that the
person owns too small of a percentage of his or her own assets (equity ownership) and is
risky for creditors and lenders. When the economy is in a ‘tight money situation’
additional cash and debt capital (loans, credit cards, etc.) will be hard to obtain and very
expensive in terms of the interest rate charged.

10.38 (a) Find cost of equity capital using CAPM.

Re = 4% + 1.05(5%)
= 9.25%
MARR = 9.25%

Find i* on 50% equity investment.

0 = -5,000,000 + 1,115,000(P/A,i*,6)
i* = 9.01% (RATE function)

The investment is not economically acceptable since i* < MARR.

(b) Determine WACC and set MARR = WACC. For 50% debt financing at 8%,

WACC = MARR = 0.5(8%) + 0.5(9.25%)

= 8.625%

The investment is acceptable, since 9.01% > 8.625%.

10.39 100% equity financing

MARR = 8.5% is known. Determine PW at the MARR.

PW = -250,000 + 30,000(P/A,8.5%,15)
= -250,000 + 30,000(8.3042)
= -250,000 + 249,126
= $-874

Since PW < 0, 100% equity does not meet the MARR requirement.

60%-40% D-E financing

Loan principal = 250,000(0.60) = $150,000
Loan payment = 150,000(A/P,9%,15)
= 150,000(0.12406)
= $18,609 per year
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

10
 Cost of 60% debt capital is 9% for the loan.

WACC = 0.4(8.5%) + 0.6(9%)

= 8.8%
MARR = 8.8%

Annual NCF = project NCF - loan payment

= $30,000 – 18,609
= $11,391
Amount of equity invested = 250,000 - 150,000
= $100,000

Calculate PW at the MARR on the basis of the committed equity capital.

PW = -100,000 + 11,391(P/A,8.8%,15)
= -100,000 + 11,391(8.1567)
= $ -7,087

Conclusion: PW < 0; a 60% debt-40% equity mix does not meet the MARR requirement.

Recommendation: Do not invest using either D-E plan, 0%-100% or 60%-40%

10.40 Determine i* for each plan

Plan 1: 80% equity means $480,000 funds are invested. Use a PW-based relation.

0 = -480,000 + 90,000 (P/A,i*,7)

i1* = 7.30% (RATE function)

Plan 2: 50% equity means $300,000 invested.

0 = -300,000 + 90,000 (P/A,i*,7)

i2* = 22.93% (RATE function)

Plan 3: 40% equity means $240,000 invested.

0 = -240,000 + 90,000(P/A,i*,7)
i3* = 32.18% (RATE function)

Determine the MARR values.

(a) MARR = 7.5% for all plans

(b) MARR1 = WACC1 = 0.8(7.5%) + 0.2(10%) = 8.0%

MARR2 = WACC2 = 0.5(7.5%) + 0.5(10%) = 8.75%
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

11
 MARR3 = WACC3 = 0.4(7.5%) + 0.6(10%) = 9.0%

(c ) MARR1 = (8.00 + 7.5)/2 = 7.75%

MARR2 = (8.75 + 7.5)/2 = 8.125%
MARR3 = (9.00 + 7.5)/2 = 8.25%

Make the decisions using i* values for each plan. The ‘?’poses the question “Is the plan
justified in that i* ≥ MARR?”. The decision is no (N) or yes (Y) for each plan.

Part (a) Part (b) Part (c)

Plan i* MARR ?+ MARR ?+ MARR ?+

1 7.30%7.5% N 8.00 % N 7.75% N

2 22.93 7.5 Y 8.75 Y 8.125 Y
3 32.18 7.5 Y 9.00 Y 8.25 Y

Same decision for all 3 options; plans 2 and 3 are acceptable.

(d) Yes, because plan 1, with 80% equity and i* = 7.3%, is the only plan not acceptable.

10.41 (a) Calculate the two WACC values for financing alternatives 1 and 2

WACC1 = 0.4(9%) + 0.6(10%) = 9.6%

WACC2 = 0.25(9%) + 0.75(10.5%) = 10.125%

Use approach 1, with a D-E mix of 40%-60%

(b) Let x1 and x2 be the maximum costs of debt capital for each plan, respectively

Alternative 1: 9.5% = WACC1 = 0.4(9%) + 0.6(x1)

x1 = 9.83%

Debt capital cost must decrease from 10% to 9.83%

Alternative 2: 9.5% = WACC2 = 0.25(9%) + 0.75(x2)

x2 = 9.67%

Debt capital cost would have to decrease from 10.5% to 9.67%

10.42 MARR = WACC + 12.5%. Total equity and debt fund is $15 million. Debt capital
gets a tax break; equity does not. From Equation [10.4]

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

12
 After-tax cost of debt = 10.4%(1 - 0.32) = 7.072%

After-tax WACC = equity cost + debt cost

= (4/15)(7.4%) + (6/15)(4.8%) + 5/15(7.072%)
= 1.973 + 1.920 + 2.357
= 6.25%

After-tax MARR = 6.25 + 12.5

= 18.75%

10.43 (a) Stan: Stock value increase: 0.10(20,000) = $2000

Equity value at year-end: $22,000 or a 10% increase

Theresa: Condo value increase: 0.10(100,000) = $10,000

Equity value at year-end: $30,000 or a 50% increase

(b) Stan: Stock value decrease: -0.10(20,000) = $-2000

Equity value at year-end: $18,000 or a 10% decrease

Theresa: Condo value decrease: -0.10(100,000) = $-10,000

Equity value at year-end: $10,000 or a 50% decrease

(c) Under high leverage situations, the gain or loss is multiplied by the leverage factor. If
the investment goes down a small amount, the higher leverage loses much more than
the unleveraged investment ($2000 loss for Stan vs. a $10,000 loss for Theresa). With
gains, the return on equity capital is much larger for the higher-leveraged investment.
This is why it is more risky.

Multiple, Non-economic Attributes

10.44 (a) Wi = 1/6 = 0.1667

i=6

(b) Rj = Σ 0.1667Vij
i=1

10.45 Σsi = 40 + 60 + 70 + 30 + 50
= 250

W1 = 40/250 = 0.16
W2 = 60/250 = 0.24
W3 = 70/250 = 0.28
W4 = 30/250 = 0.12
W5 = 50/250 = 0.20
1.00

10.46 (a) S = 1 + 2 + 3 +… + 10
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

13
 = n(n+1)/2
= 10(11)/2
= 55

(b) WD = 4/55 = 0.073

(c) S = 1 + 2 + 3 + 10 + 5 + … + 10
= 61

WD = 10/61 = 0.164

10.47 Ratings by attribute with 10 for #1

Attribute, i Importance, Si Logic________

1 10 Most important (10)
2 2.5 0.5(5) = 2.5
3 5 1/2(10) = 5
4 5 1/2(10) = 5
5 5 2(2.5) = 5
27.5

Wi = si/27.5

Attribute, i Wi
1 0.364
2 0.090
3 0.182
4 0.182
5 0.182
1.000

10.48 Ratings by attribute with 100 for most important.

Logic: #1 = 0.90(#5) = 0.90(100) = 90

#2 = 0.10(100) = 10
#3 = 0.30(100) = 30
#4 = 2(#3) = 2(30) = 60
#5 = 100
#6 = 0.80(#4) = 0.80(60) = 48

Attribute Importance
1 9
2 1
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

14
 3 3
4 6
5 10
6 4.8
33.8
Wi = Score/33.8

Attribute Wi______
1 9/33.8 = 0.27
2 1/33.8 = 0.03
3 3/33.8 = 0.09
4 6/33.8 = 0.18
5 10/33.8 = 0.30
6 4.8/33.8 = 0.14
10.49 (a) Calculate Wi = importance score/sum and solve for Rj

Inspector

Attribute, Importance Rj = Wj×Vij___

i score Wi 1 2 3__
1 20 0.10 5 7 10
2 80 0.40 40 24 12
3 100 0.50 50 20 25
Sum 200 95 51 47

Select alternative 1 since R1 = 95 is largest.

Manager

Attribute, Importance _Rj = Wj×Vij___

i score Wi 1 2 3_
1 100 0.50 25 35 50
2 80 0.40 40 24 12
3 20 0.10 10 4 5
Sum 200 1.00 75 63 67

Since R1 = 75 is the largest, select alternative 1

(b) Results are the same, even though the Inspector and Manager rated opposite on
factors 1 and 3. The high score on attribute 1 (ROR) by the Manager is balanced by
the Inspector’s high score on attribute 3 (accuracy).

10.50 (a) Calculate Rj using manager scores.

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

15
 Wi = Importance score
Sum

Attribute, Importance Rj_______

i by Manager Wi A B__
1 80 0.48 0.48 0.43
2 35 0.21 0.07 0.11
3 30 0.18 0.18 0.04
4 20 0.12 0.03 0.12
165 0.76 0.70

Select proposal A

(b) Calculate Rj using the team supervisor scores.

Attribute, Importance Rj______

i by Supervisor Wi A B__
1 25 0.08 0.08 0.07
2 80 0.27 0.09 0.14
3 100 0.34 0.34 0.07
4 90 0.31 0.08 0.31
295 0.59 0.59

Either proposal is acceptable

(c) Select A, since PWA is larger

Conclusion: 2 methods indicate A, but the supervisor’s score-basis indicates

indifference between A and B.

Spreadsheet Exercises
10.51 (a) Top part of the spreadsheet image indicates a D-E mix of 50%-50% to have the
lowest WACC at 9.7%. Graph is included.

(b) Lower image shows updated WACC values. D-E mix of 35%-65% has lowest WACC
of 10.19%. Row 27 is a repeat of the 35%-65% analysis. Goal Seek results in:

Maximum debt percentage of 10.15% to obtain WACC = 9.9%. The D-E mix is
10.15%-89.85%

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

16
10.52 (a) Project i* = 9.012% for the 50-50 D-E mix, where $5,000,000 in equity is required.
(See cells F6 and K6).

Project justified, since i* = 9.012% > MARR = 8.625%

(b) Project i* values on equity basis are shown in columns F and K. The results are the
same for both banks and varying loan rates for increasing debt percentages.

First three D-E mixes (equity of 80%, 70%, and 60%) indicate that the project is
not justified. For lower equity percentages, the project is justified.

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

17
10.53 Two independent, revenue projects with different lives. Find AW at MARR, select all
with AW > 0. Find WACC first.

Equity capital is 40% at a cost of 7.5% per year

Debt capital costs 5% per year, compounded quarterly. Effective after-tax rate is:

Effective after-tax debt cost = [(1 + 0.05/4)4 - 1] (1 - 0.3) (100%)

= 5.095(0.7)
= 3.566% per year

WACC = 0.4(7.5%) + 0.6(3.566%)

= 5.14% per year

MARR = WACC = 5.14%

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

18
 (a) At MARR = 5.14%, both projects are acceptable (row 17)

(b) Project W is acceptable, since i*W = 14.04% > MARR + 2% = 7.14% (row 20)
Project R is not acceptable, since i*R = 6.40% < MARR + 2% = 7.14%

10.54 (a) The spreadsheet shows that A is selected from the manager’s scores (RA = 0.771) and
that A is very, very slightly better than B using the supervisor’s scores (RA = 0.595 vs.
RB = 0.585).

(b) Use Goal Seek to force RB to equal 0.595*1.10 = 0.655. Your value rating for safety
must increase from 0.20 to a minimum of 0.41.

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

19
Additional Problems and FE Exam Review Questions

10.55 Answer is (d)

10.56 WACC = equity fraction(cost of equity) + fraction of debt(cost of debt)

0.10 = 0.60(x) + 0.40(0.04)
x = 0.14 (14%)
Answer is (c)

10.57 % debt = 15/(6 + 3.5 + 15)

= 61.2%

% equity = (6 + 3.5)/(6 + 3.5 + 15)

= 38.8%

D-E mix = 61-39

Answer is (a)

10.58 Answer is (b)

10.59 WACC = (5/10)(13.7%) + (2/10)(8.9%) + (3/10)(7.8%)

= 10.97%
Answer is (c)

10.60 Before-tax ROR = after-tax ROR/(1 - Te)

= 11.2%/(1 - 0.39)
= 18.36%
Answer is (c)

10.61 Historical WACC = 0.5(11%) + 0.5(9%) = 10%

Let x = cost of equity capital

WACC = (equity fraction)(cost of equity) + (fraction of debt)(cost of debt)

10% = 0.25(x) + 0.75[9%(1.2)]

x = (10 - 8.1)/0.25
= 7.6%
Answer is (a)
10.62 Σsi = 55 + 45 + 85 + 30 + 60 = 275

W1 = 55/275 = 0.20
Answer is (b)

10.63 Answer is (b)

Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent
of McGraw-Hill Education.

20
Another Random Scribd Document
with Unrelated Content
the sand. We look back through countless millions of years and see
the will to live struggling out of the intertidal slime, struggling from
shape to shape and from power to power, crawling and then walking
confidently upon the land, struggling generation after generation to
master the air, creeping down into the darkness of the deep; we see
it turn upon itself in rage and hunger and reshape itself anew; we
watch it draw nearer and more akin to us, expanding, elaborating
itself, pursuing its relentless, inconceivable purpose, until at last it
reaches us and its being beats through our brains and arteries,
throbs and thunders in our battleships, roars through our cities,
sings in our music, and flowers in our art. And when, from that
retrospect, we turn again toward the future, surely any thought of
finality, any millennial settlement of cultured persons, has vanished
from our minds.

This fact that man is not final is the great unmanageable, disturbing
fact that arises upon us in the scientific discovery of the future, and
to my mind, at any rate, the question what is to come after man is
the most persistently fascinating and the most insoluble question in
the whole world.

Of course we have no answer. Such imaginations as we have refuse

to rise to the task.

But for the nearer future, while man is still man, there are a few
general statements that seem to grow more certain. It seems to be
pretty generally believed to-day that our dense populations are in
the opening phase of a process of diffusion and aeration. It seems
pretty inevitable also that at least the mass of white population in
the world will be forced some way up the scale of education and
personal efficiency in the next two or three decades. It is not difficult
to collect reasons for supposing—and such reasons have been
collected—that in the near future, in a couple of hundred years, as
one rash optimist has written, or in a thousand or so, humanity will
be definitely and conscientiously organizing itself as a great world
state—a great world state that will purge from itself much that is
mean, much that is bestial, and much that makes for individual
dullness and dreariness, grayness and wretchedness in the world of
to-day; and although we know that there is nothing final in that
world state, although we see it only as something to be reached and
passed, although we are sure there will be no such sitting down to
restore and perfect a culture as the positivists foretell, yet few
people can persuade themselves to see anything beyond that except
in the vaguest and most general terms. That world state of more
vivid, beautiful, and eventful people is, so to speak, on the brow of
the hill, and we cannot see over, though some of us can imagine
great uplands beyond and something, something that glitters
elusively, taking first one form and then another, through the haze.
We can see no detail, we can see nothing definable, and it is simply,
I know, the sanguine necessity of our minds that makes us believe
those uplands of the future are still more gracious and splendid than
we can either hope or imagine. But of things that can be
demonstrated we have none.

Yet I suppose most of us entertain certain necessary persuasions,

without which a moral life in this world is neither a reasonable nor a
possible thing. All this paper is built finally upon certain negative
beliefs that are incapable of scientific establishment. Our lives and
powers are limited, our scope in space and time is limited, and it is
not unreasonable that for fundamental beliefs we must go outside
the sphere of reason and set our feet upon faith. Implicit in all such
speculations as this is a very definite and quite arbitrary belief, and
that belief is that neither humanity nor in truth any individual human
being is living its life in vain. And it is entirely by an act of faith that
we must rule out of our forecasts certain possibilities, certain things
that one may consider improbable and against the chances, but that
no one upon scientific grounds can call impossible.

One must admit that it is impossible to show why certain things

should not utterly destroy and end the entire human race and story,
why night should not presently come down and make all our dreams
and efforts vain. It is conceivable, for example, that some great
unexpected mass of matter should presently rush upon us out of
space, whirl sun and planets aside like dead leaves before the
breeze, and collide with and utterly destroy every spark of life upon
this earth. So far as positive human knowledge goes, this is a
conceivably possible thing. There is nothing in science to show why
such a thing should not be. It is conceivable, too, that some
pestilence may presently appear, some new disease, that will
destroy, not 10 or 15 or 20 per cent. of the earth’s inhabitants as
pestilences have done in the past, but 100 per cent.; and so end our
race. No one, speaking from scientific grounds alone, can say, “That
cannot be.” And no one can dispute that some great disease of the
atmosphere, some trailing cometary poison, some great emanation
of vapor from the interior of the earth, such as Mr. Shiel has made a
brilliant use of in his “Purple Cloud,” is consistent with every
demonstrated fact in the world. There may arise new animals to
prey upon us by land and sea, and there may come some drug or a
wrecking madness into the minds of men. And finally, there is the
reasonable certainty that this sun of ours must radiate itself toward
extinction; that, at least, must happen; it will grow cooler and cooler,
and its planets will rotate ever more sluggishly until some day this
earth of ours, tideless and slow moving, will be dead and frozen, and
all that has lived upon it will be frozen out and done with. There
surely man must end. That of all such nightmares is the most
insistently convincing.

And yet one doesn’t believe it.

At least I do not. And I do not believe in these things because I have

come to believe in certain other things—in the coherency and
purpose in the world and in the greatness of human destiny. Worlds
may freeze and suns may perish, but there stirs something within us
now that can never die again.

Do not misunderstand me when I speak of the greatness of human

destiny.
If I may speak quite openly to you, I will confess that, considered as
a final product, I do not think very much of myself or (saving your
presence) my fellow-creatures. I do not think I could possibly join in
the worship of humanity with any gravity or sincerity. Think of it!
Think of the positive facts. There are surely moods for all of us when
one can feel Swift’s amazement that such a being should deal in
pride. There are moods when one can join in the laughter of
Democritus; and they would come oftener were not the spectacle of
human littleness so abundantly shot with pain. But it is not only with
pain that the world is shot—it is shot with promise. Small as our
vanity and carnality make us, there has been a day of still smaller
things. It is the long ascent of the past that gives the lie to our
despair. We know now that all the blood and passion of our life were
represented in the Carboniferous time by something—something,
perhaps, cold-blooded and with a clammy skin, that lurked between
air and water, and fled before the giant amphibia of those days.

For all the folly, blindness, and pain of our lives, we have come some
way from that. And the distance we have travelled gives us some
earnest of the way we have yet to go.

Why should things cease at man? Why should not this rising curve
rise yet more steeply and swiftly? There are many things to suggest
that we are now in a phase of rapid and unprecedented
development. The conditions under which men live are changing
with an ever-increasing rapidity, and, so far as our knowledge goes,
no sort of creatures have ever lived under changing conditions
without undergoing the profoundest changes themselves. In the past
century there was more change in the conditions of human life than
there had been in the previous thousand years. A hundred years ago
inventors and investigators were rare scattered men, and now
invention and inquiry are the work of an unorganized army. This
century will see changes that will dwarf those of the nineteenth
century, as those of the nineteenth dwarf those of the eighteenth.
One can see no sign anywhere that this rush of change will be over
presently, that the positivist dream of a social reconstruction and of
a new static culture phase will ever be realized. Human society never
has been quite static, and it will presently cease to attempt to be
static.

Everything seems pointing to the belief that we are entering upon a

progress that will go on, with an ever-widening and ever more
confident stride, forever. The reorganization of society that is going
on now beneath the traditional appearance of things is a kinetic
reorganization. We are getting into marching order. We have struck
our camp forever and we are out upon the roads.

We are in the beginning of the greatest change that humanity has

ever undergone. There is no shock, no epoch-making incident—but
then there is no shock at a cloudy daybreak. At no point can we say,
“Here it commences, now; last minute was night and this is
morning.” But insensibly we are in the day. If we care to look, we
can foresee growing knowledge, growing order, and presently a
deliberate improvement of the blood and character of the race. And
what we can see and imagine gives us a measure and gives us faith
for what surpasses the imagination.

It is possible to believe that all the past is but the beginning of a

beginning, and that all that is and has been is but the twilight of the
dawn. It is possible to believe that all that the human mind has ever
accomplished is but the dream before the awakening. We cannot
see, there is no need for us to see, what this world will be like when
the day has fully come. We are creatures of the twilight. But it is out
of our race and lineage that minds will spring, that will reach back to
us in our littleness to know us better than we know ourselves, and
that will reach forward fearlessly to comprehend this future that
defeats our eyes.

All this world is heavy with the promise of greater things, and a day
will come, one day in the unending succession of days, when beings,
beings who are now latent in our thoughts and hidden in our loins,
shall stand upon this earth as one stands upon a footstool, and shall
laugh and reach out their hands amid the stars.
 FOOTNOTE
[1] A discourse delivered at the Royal Institution.
 THE ART of LIFE SERIES
EDWARD HOWARD GRIGGS, Editor
“The aim of this series of brief books is to illuminate the never-to-be-
finished art of living. There is no thought of solving the problems or
giving dogmatic theories of conduct. Rather the purpose is to bring
together in brief form the thoughts of some wise minds and the
insight and appreciation of some deep characters, trained in the
actual world of experience but attaining a vision of life in clear and
wide perspective. Such books should act as a challenge to the
reader’s own mind, bringing him to a clearer recognition of the
problems of his life and the laws governing them, deepening his
insight into the wonder and meaning of life and developing an
attitude of appreciation that may make possible the wise and
earnest facing of the deeps, dark or beautiful, in the life of the
personal spirit.—From the Editor’s Introduction to the Series, printed
in full in “The Use of the Margin.”
Volumes ready:
WHERE KNOWLEDGE FAILS By Earl Barnes
THE SIXTH SENSE. By Charles H. Brent
Its cultivation and use.
THE BURDEN OF POVERTY By Charles F. Dole
What to do.
HUMAN EQUIPMENT By Edward Howard Griggs
Its use and abuse.
THE USE OF THE MARGIN By Edward Howard Griggs
THINGS WORTH WHILE By Thomas Wentworth Higginson
SELF-MEASUREMENT By William DeWitt Hyde
A scale of human values with directions for personal application.
THE SUPER RACE. By Scott Nearing
An American problem.
PRODUCT AND CLIMAX By Simon Nelson Patten
LATTER DAY SINNERS AND SAINTS By Edward Alsworth Ross

Each 50 cents net; by mail, 55 cents

To be had of all booksellers or the publisher
B. W. HUEBSCH
225 Fifth Avenue New York
 Transcriber’s Note

This text has been preserved as in the original, including archaic and
inconsistent spelling, punctuation and grammar, except that obvious printer’s
errors have been corrected.
The footnote was moved to the end of the text.
*** END OF THE PROJECT GUTENBERG EBOOK THE DISCOVERY OF
THE FUTURE ***

Updated editions will replace the previous one—the old editions will
be renamed.

Creating the works from print editions not protected by U.S.

copyright law means that no one owns a United States copyright in
these works, so the Foundation (and you!) can copy and distribute it
in the United States without permission and without paying
copyright royalties. Special rules, set forth in the General Terms of
Use part of this license, apply to copying and distributing Project
Gutenberg™ electronic works to protect the PROJECT GUTENBERG™
concept and trademark. Project Gutenberg is a registered trademark,
and may not be used if you charge for an eBook, except by following
the terms of the trademark license, including paying royalties for use
of the Project Gutenberg trademark. If you do not charge anything
for copies of this eBook, complying with the trademark license is
very easy. You may use this eBook for nearly any purpose such as
creation of derivative works, reports, performances and research.
Project Gutenberg eBooks may be modified and printed and given
away—you may do practically ANYTHING in the United States with
eBooks not protected by U.S. copyright law. Redistribution is subject
to the trademark license, especially commercial redistribution.

START: FULL LICENSE

THE FULL PROJECT GUTENBERG LICENSE
 PLEASE READ THIS BEFORE YOU DISTRIBUTE OR USE THIS WORK

To protect the Project Gutenberg™ mission of promoting the free

distribution of electronic works, by using or distributing this work (or
any other work associated in any way with the phrase “Project
Gutenberg”), you agree to comply with all the terms of the Full
Project Gutenberg™ License available with this file or online at
www.gutenberg.org/license.

Section 1. General Terms of Use and

Redistributing Project Gutenberg™
electronic works
1.A. By reading or using any part of this Project Gutenberg™
electronic work, you indicate that you have read, understand, agree
to and accept all the terms of this license and intellectual property
(trademark/copyright) agreement. If you do not agree to abide by all
the terms of this agreement, you must cease using and return or
destroy all copies of Project Gutenberg™ electronic works in your
possession. If you paid a fee for obtaining a copy of or access to a
Project Gutenberg™ electronic work and you do not agree to be
bound by the terms of this agreement, you may obtain a refund
from the person or entity to whom you paid the fee as set forth in
paragraph 1.E.8.

1.B. “Project Gutenberg” is a registered trademark. It may only be

used on or associated in any way with an electronic work by people
who agree to be bound by the terms of this agreement. There are a
few things that you can do with most Project Gutenberg™ electronic
works even without complying with the full terms of this agreement.
See paragraph 1.C below. There are a lot of things you can do with
Project Gutenberg™ electronic works if you follow the terms of this
agreement and help preserve free future access to Project
Gutenberg™ electronic works. See paragraph 1.E below.
1.C. The Project Gutenberg Literary Archive Foundation (“the
Foundation” or PGLAF), owns a compilation copyright in the
collection of Project Gutenberg™ electronic works. Nearly all the
individual works in the collection are in the public domain in the
United States. If an individual work is unprotected by copyright law
in the United States and you are located in the United States, we do
not claim a right to prevent you from copying, distributing,
performing, displaying or creating derivative works based on the
work as long as all references to Project Gutenberg are removed. Of
course, we hope that you will support the Project Gutenberg™
mission of promoting free access to electronic works by freely
sharing Project Gutenberg™ works in compliance with the terms of
this agreement for keeping the Project Gutenberg™ name associated
with the work. You can easily comply with the terms of this
agreement by keeping this work in the same format with its attached
full Project Gutenberg™ License when you share it without charge
with others.

1.D. The copyright laws of the place where you are located also
govern what you can do with this work. Copyright laws in most
countries are in a constant state of change. If you are outside the
United States, check the laws of your country in addition to the
terms of this agreement before downloading, copying, displaying,
performing, distributing or creating derivative works based on this
work or any other Project Gutenberg™ work. The Foundation makes
no representations concerning the copyright status of any work in
any country other than the United States.

1.E. Unless you have removed all references to Project Gutenberg:

1.E.1. The following sentence, with active links to, or other

immediate access to, the full Project Gutenberg™ License must
appear prominently whenever any copy of a Project Gutenberg™
work (any work on which the phrase “Project Gutenberg” appears,
or with which the phrase “Project Gutenberg” is associated) is
accessed, displayed, performed, viewed, copied or distributed:
 This eBook is for the use of anyone anywhere in the United
States and most other parts of the world at no cost and with
almost no restrictions whatsoever. You may copy it, give it away
or re-use it under the terms of the Project Gutenberg License
included with this eBook or online at www.gutenberg.org. If you
are not located in the United States, you will have to check the
laws of the country where you are located before using this
eBook.

1.E.2. If an individual Project Gutenberg™ electronic work is derived

from texts not protected by U.S. copyright law (does not contain a
notice indicating that it is posted with permission of the copyright
holder), the work can be copied and distributed to anyone in the
United States without paying any fees or charges. If you are
redistributing or providing access to a work with the phrase “Project
Gutenberg” associated with or appearing on the work, you must
comply either with the requirements of paragraphs 1.E.1 through
1.E.7 or obtain permission for the use of the work and the Project
Gutenberg™ trademark as set forth in paragraphs 1.E.8 or 1.E.9.

1.E.3. If an individual Project Gutenberg™ electronic work is posted

with the permission of the copyright holder, your use and distribution
must comply with both paragraphs 1.E.1 through 1.E.7 and any
additional terms imposed by the copyright holder. Additional terms
will be linked to the Project Gutenberg™ License for all works posted
with the permission of the copyright holder found at the beginning
of this work.

1.E.4. Do not unlink or detach or remove the full Project

Gutenberg™ License terms from this work, or any files containing a
part of this work or any other work associated with Project
Gutenberg™.

1.E.5. Do not copy, display, perform, distribute or redistribute this

electronic work, or any part of this electronic work, without
prominently displaying the sentence set forth in paragraph 1.E.1
with active links or immediate access to the full terms of the Project
Gutenberg™ License.

1.E.6. You may convert to and distribute this work in any binary,
compressed, marked up, nonproprietary or proprietary form,
including any word processing or hypertext form. However, if you
provide access to or distribute copies of a Project Gutenberg™ work
in a format other than “Plain Vanilla ASCII” or other format used in
the official version posted on the official Project Gutenberg™ website
(www.gutenberg.org), you must, at no additional cost, fee or
expense to the user, provide a copy, a means of exporting a copy, or
a means of obtaining a copy upon request, of the work in its original
“Plain Vanilla ASCII” or other form. Any alternate format must
include the full Project Gutenberg™ License as specified in
paragraph 1.E.1.

1.E.7. Do not charge a fee for access to, viewing, displaying,

performing, copying or distributing any Project Gutenberg™ works
unless you comply with paragraph 1.E.8 or 1.E.9.

1.E.8. You may charge a reasonable fee for copies of or providing

access to or distributing Project Gutenberg™ electronic works
provided that:

• You pay a royalty fee of 20% of the gross profits you derive
from the use of Project Gutenberg™ works calculated using the
method you already use to calculate your applicable taxes. The
fee is owed to the owner of the Project Gutenberg™ trademark,
but he has agreed to donate royalties under this paragraph to
the Project Gutenberg Literary Archive Foundation. Royalty
payments must be paid within 60 days following each date on
which you prepare (or are legally required to prepare) your
periodic tax returns. Royalty payments should be clearly marked
as such and sent to the Project Gutenberg Literary Archive
Foundation at the address specified in Section 4, “Information
 about donations to the Project Gutenberg Literary Archive
Foundation.”

• You provide a full refund of any money paid by a user who

notifies you in writing (or by e-mail) within 30 days of receipt
that s/he does not agree to the terms of the full Project
Gutenberg™ License. You must require such a user to return or
destroy all copies of the works possessed in a physical medium
and discontinue all use of and all access to other copies of
Project Gutenberg™ works.

• You provide, in accordance with paragraph 1.F.3, a full refund of

any money paid for a work or a replacement copy, if a defect in
the electronic work is discovered and reported to you within 90
days of receipt of the work.

• You comply with all other terms of this agreement for free
distribution of Project Gutenberg™ works.

1.E.9. If you wish to charge a fee or distribute a Project Gutenberg™

electronic work or group of works on different terms than are set
forth in this agreement, you must obtain permission in writing from
the Project Gutenberg Literary Archive Foundation, the manager of
the Project Gutenberg™ trademark. Contact the Foundation as set
forth in Section 3 below.

1.F.

1.F.1. Project Gutenberg volunteers and employees expend

considerable effort to identify, do copyright research on, transcribe
and proofread works not protected by U.S. copyright law in creating
the Project Gutenberg™ collection. Despite these efforts, Project
Gutenberg™ electronic works, and the medium on which they may
be stored, may contain “Defects,” such as, but not limited to,
incomplete, inaccurate or corrupt data, transcription errors, a
copyright or other intellectual property infringement, a defective or
damaged disk or other medium, a computer virus, or computer
codes that damage or cannot be read by your equipment.

1.F.2. LIMITED WARRANTY, DISCLAIMER OF DAMAGES - Except for

the “Right of Replacement or Refund” described in paragraph 1.F.3,
the Project Gutenberg Literary Archive Foundation, the owner of the
Project Gutenberg™ trademark, and any other party distributing a
Project Gutenberg™ electronic work under this agreement, disclaim
all liability to you for damages, costs and expenses, including legal
fees. YOU AGREE THAT YOU HAVE NO REMEDIES FOR
NEGLIGENCE, STRICT LIABILITY, BREACH OF WARRANTY OR
BREACH OF CONTRACT EXCEPT THOSE PROVIDED IN PARAGRAPH
1.F.3. YOU AGREE THAT THE FOUNDATION, THE TRADEMARK
OWNER, AND ANY DISTRIBUTOR UNDER THIS AGREEMENT WILL
NOT BE LIABLE TO YOU FOR ACTUAL, DIRECT, INDIRECT,
CONSEQUENTIAL, PUNITIVE OR INCIDENTAL DAMAGES EVEN IF
YOU GIVE NOTICE OF THE POSSIBILITY OF SUCH DAMAGE.

1.F.3. LIMITED RIGHT OF REPLACEMENT OR REFUND - If you

discover a defect in this electronic work within 90 days of receiving
it, you can receive a refund of the money (if any) you paid for it by
sending a written explanation to the person you received the work
from. If you received the work on a physical medium, you must
return the medium with your written explanation. The person or
entity that provided you with the defective work may elect to provide
a replacement copy in lieu of a refund. If you received the work
electronically, the person or entity providing it to you may choose to
give you a second opportunity to receive the work electronically in
lieu of a refund. If the second copy is also defective, you may
demand a refund in writing without further opportunities to fix the
problem.

1.F.4. Except for the limited right of replacement or refund set forth
in paragraph 1.F.3, this work is provided to you ‘AS-IS’, WITH NO
OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PURPOSE.

1.F.5. Some states do not allow disclaimers of certain implied

warranties or the exclusion or limitation of certain types of damages.
If any disclaimer or limitation set forth in this agreement violates the
law of the state applicable to this agreement, the agreement shall be
interpreted to make the maximum disclaimer or limitation permitted
by the applicable state law. The invalidity or unenforceability of any
provision of this agreement shall not void the remaining provisions.

1.F.6. INDEMNITY - You agree to indemnify and hold the Foundation,

the trademark owner, any agent or employee of the Foundation,
anyone providing copies of Project Gutenberg™ electronic works in
accordance with this agreement, and any volunteers associated with
the production, promotion and distribution of Project Gutenberg™
electronic works, harmless from all liability, costs and expenses,
including legal fees, that arise directly or indirectly from any of the
following which you do or cause to occur: (a) distribution of this or
any Project Gutenberg™ work, (b) alteration, modification, or
additions or deletions to any Project Gutenberg™ work, and (c) any
Defect you cause.

Section 2. Information about the Mission

of Project Gutenberg™
Project Gutenberg™ is synonymous with the free distribution of
electronic works in formats readable by the widest variety of
computers including obsolete, old, middle-aged and new computers.
It exists because of the efforts of hundreds of volunteers and
donations from people in all walks of life.

Volunteers and financial support to provide volunteers with the

assistance they need are critical to reaching Project Gutenberg™’s
goals and ensuring that the Project Gutenberg™ collection will
remain freely available for generations to come. In 2001, the Project
Gutenberg Literary Archive Foundation was created to provide a
secure and permanent future for Project Gutenberg™ and future
generations. To learn more about the Project Gutenberg Literary
Archive Foundation and how your efforts and donations can help,
see Sections 3 and 4 and the Foundation information page at
www.gutenberg.org.

Section 3. Information about the Project

Gutenberg Literary Archive Foundation
The Project Gutenberg Literary Archive Foundation is a non-profit
501(c)(3) educational corporation organized under the laws of the
state of Mississippi and granted tax exempt status by the Internal
Revenue Service. The Foundation’s EIN or federal tax identification
number is 64-6221541. Contributions to the Project Gutenberg
Literary Archive Foundation are tax deductible to the full extent
permitted by U.S. federal laws and your state’s laws.

The Foundation’s business office is located at 809 North 1500 West,

Salt Lake City, UT 84116, (801) 596-1887. Email contact links and up
to date contact information can be found at the Foundation’s website
and official page at www.gutenberg.org/contact

Section 4. Information about Donations to

the Project Gutenberg Literary Archive
Foundation
Project Gutenberg™ depends upon and cannot survive without
widespread public support and donations to carry out its mission of
increasing the number of public domain and licensed works that can
be freely distributed in machine-readable form accessible by the
widest array of equipment including outdated equipment. Many
small donations ($1 to $5,000) are particularly important to
maintaining tax exempt status with the IRS.

The Foundation is committed to complying with the laws regulating

charities and charitable donations in all 50 states of the United
States. Compliance requirements are not uniform and it takes a
considerable effort, much paperwork and many fees to meet and
keep up with these requirements. We do not solicit donations in
locations where we have not received written confirmation of
compliance. To SEND DONATIONS or determine the status of
compliance for any particular state visit www.gutenberg.org/donate.

While we cannot and do not solicit contributions from states where

we have not met the solicitation requirements, we know of no
prohibition against accepting unsolicited donations from donors in
such states who approach us with offers to donate.

International donations are gratefully accepted, but we cannot make

any statements concerning tax treatment of donations received from
outside the United States. U.S. laws alone swamp our small staff.

Please check the Project Gutenberg web pages for current donation
methods and addresses. Donations are accepted in a number of
other ways including checks, online payments and credit card
donations. To donate, please visit: www.gutenberg.org/donate.

Section 5. General Information About

Project Gutenberg™ electronic works
Professor Michael S. Hart was the originator of the Project
Gutenberg™ concept of a library of electronic works that could be
freely shared with anyone. For forty years, he produced and
distributed Project Gutenberg™ eBooks with only a loose network of
volunteer support.
Project Gutenberg™ eBooks are often created from several printed
editions, all of which are confirmed as not protected by copyright in
the U.S. unless a copyright notice is included. Thus, we do not
necessarily keep eBooks in compliance with any particular paper
edition.

Most people start at our website which has the main PG search
facility: www.gutenberg.org.

This website includes information about Project Gutenberg™,

including how to make donations to the Project Gutenberg Literary
Archive Foundation, how to help produce our new eBooks, and how
to subscribe to our email newsletter to hear about new eBooks.
Welcome to our website – the ideal destination for book lovers and
knowledge seekers. With a mission to inspire endlessly, we offer a
vast collection of books, ranging from classic literary works to
specialized publications, self-development books, and children's
literature. Each book is a new journey of discovery, expanding
knowledge and enriching the soul of the reade

Our website is not just a platform for buying books, but a bridge
connecting readers to the timeless values of culture and wisdom. With
an elegant, user-friendly interface and an intelligent search system,
we are committed to providing a quick and convenient shopping
experience. Additionally, our special promotions and home delivery
services ensure that you save time and fully enjoy the joy of reading.

Let us accompany you on the journey of exploring knowledge and

personal growth!

testbankdeal.com