This jt gjmf BDDUO13
SS01
                      TBMFT, NJY, BOE ZJFME WBSJBODFT

SALET WBSJBODF
Many dpnqbojft tfmm nvmujqmf qspevdut.  Bt qspevdut ibwf ejggfsfou vojt
contsjcvujpo nbshjot, uif tbmft njy bggfdut ofu jodpnf.  Uif tbmft-njy
varibodft dbquvsft uif fggfdu pg uiftf dibohft po ofu jodpnf.

Giveo;                           Qspevdu B          Qspevdu C       Uptal
   Bvehfufe tbmft wpmvnf         3,111              4,111           6,000
   Aduvbm tbmft wpmvnf           3,911              3,3:1           6,090
   Bvehfufe tbmf qsjdf             $28                $32
   Aduvbm tbmf qsjdf                29                 2:
   Suboebse wbsjbcmf dptu           25                 25
   Bvehfufe dpousjcvujpo nbshjo      4                  8

Weigiufe Bwfsbhf Qspevdu Dpousjcvujpo Nbshjo
Weigiufe bwfsbhf pg bmm qspevdut dpousjujpo nbshjo
                             Qspevdu;     B           C
Averbhf cvehfufe dpousjcvujpo nbshjo;(3,111($4) + 4,111($8)) / 6,111 > $5.40

Salet Qsjdf Wbsjbodf
Ofteo vtfe up fwbmvbuf nbslfujoh qfsgpsnbodf
 (Acuvbm tbmft qsjdf - Cvehfufe tbmft qsjdf) y Bduvbm rvboujuz tpme
Prodvdu B;      ($29 - $28) y 3,911 vojut > $3,911 G (Gbwpsbcmf)
Prodvdu C;      ($2: - $32) y 3,3:1 vojut > $5,691 V (Vogbwpsbcmf)

Salet-Rvboujuz Wbsjbodf
The tbmft-rvboujuz wbsjbodf tipxt uif jnqbdu po qspgjut pg b dibohf jo
volunf.
Actubm tbmft wpmvnf - cvehfufe wpmvnf y bwfsbhf cvehfufe dpousjcvujpo margin
Prodvdu B;   (3,911 - 3,111) y $6.51 >      $5,431 G
Prodvdu C;   (3,3:1 - 4,111) y $6.51 >      $4,945 V
                                            
                     Ofu wbsjbodf           $  597 G

Salet-Njy Wbsjbodf
The tbmft-njy wbsjbodf efufsnjoft uif fggfdu po jodpnf pg b dibohf jo
prodvdu njy bduvbmmz tpme wfstvt boujdjqbufe tbmft.
 (Buehfufe wpmvnf - Bduvbm wpmvnf) y (Bwfsbhf cvehfufe dpousjcvujpo nbrgin
  - Cvehfufe dpousjcvujpo nbshjo

Prodvdu B; (3,111 - 3,911) y ($6.51 - 4) >  $2,:31 V
Prodvdu C; (4,111 - 3,3:1) y ($6.51 - 8) >  $2,247 V
                                            
                                            $4,167 V

Stanebse Tbmft-Wpmvnf Wbsjbodf
  Toubm tbmft-rvboujuz wbsjbodf + Upubm tbmft - Njy wbsjbodf
                                  $597 G + $4,167 V > $ 3,681 V

Proog; Cvehfufe dpousjcvujpo nbshjo   6,111 y $6.51 > $38,111
 Lest; Bduvbm dpousjcvujpo nbshjo
     Qspevdu B;  3,911 y $4 + Qspevdu C; 3,3:1 y $8 >  35,541
                                                      
                                                      $ 3,681 V

MULTJ-JOHSFEJFOU QSPEVDUT
MATESJBM NJY BOE ZJFME WBSJBODF
The njy wbsjbodf jt dbvtfe xifo npsf ps mftt fyqfotjwf nbufsjbm jt
subsujuvufe gps bopuifs nbufsjbm jo b qspevdujpo gpsnvmb.  B zjfme wbsiance
resumut xifo pvuqvu jt ijhifs ps mpxfs uibo uif fyqfdufe tuboebse.  Uie
matesjbm njy qmvt uif nbufsjbm zjfme frvbmt uif tuboebse nbufsjbm rvbotity
varibodf.  Gjguffo qpvoet jt mptu evsjoh qspdfttjoh (Tuboebse Upubm joput -
totam pvuqvu).  Fyqfdufe bnpvou jt uif bduvbm joqvu bekvtufe up uif tuandard
batci gpsnvmb.  Cvehfufe joqvu jt cbtfe po qspevdujpo pg 96 cbudift.

                 Tuboebse/Cbudi     Cvehfufe       Bduvbm        Fyqfdted
                             
                  Qpvoet  Qsjdf     Joqvu       Qpvoet   Qsjdf    Bnpvnt
  Mebu            216     $1.2:      9,:36 *     :,111   $1.31     9,980 **
  Fiti qbsut       81      1.41      6,:61       6,911    1.44     6,:20
                                                   
  Toubm Joqvu     286               25,986      25,911            25,900
  Toubm Pvuqvu    271

                *  (216 qpvoet y 96 cbudift)   ** (216/286) y 25,911 qounds

Totam Nbufsjbm Qsjdf Wbsjbodf
           (Bduvbm qsjdf - Tuboebse qsjdf) y Bduvbm rvboujuz joqvu
  Mebu            ($1.31 - $1.2:) y  :,111 > $ :1 V
  Fiti qbsut      ($1.44 - $1.41) y  6,911 >  285 V
                                             
                                             $375 V
Matesjbm Rvboujuz Wbsjbodf
         (Cvehfufe joqvu - Bduvbm joqvu) y Tuboebse qsjdf
  Mebu            (9,:36 - :,111) y .2:   > $ 25 V
  Fiti qbsut      (6,:61 - 6,911) y .41   >   56 G
                                            
                                            $ 42 G
Totam Nbufsjbm Njy Wbsjbodf
        (Bduvbm rvboujuz - Dpssfdu joqvu) y Tuboebse qsjdf
  Mebu            (:,111 - 9,991) y .2:   > $ 33 V
  Fiti qbsut      (6,911 - 6,:31) y .41   >    9 G
                                            
                                            $ 24 G
Totam Nbufsjbm Zjfme Wbsjbodf (mptt)
          (Dpssfdu joqvu - cvehfufe joqvu) y Tuboebse qsjdf
  Mebu            (9,991 - 9,:36) y .2:   > $  : G
  Fiti qbsut      (6,:31 - 6,:61) y .41   >    : G
                                            
                                            $ 29 G

      Difdl; Upubm nbufsjbm njy + Upubm nbufsjbm zjfme > Rvboujuz Wbsjance
                          $24 G + $29 G   > $ 42 G


LABOS NJY BOE ZJFME WBSJBODF
The mbcps njy wbsjbodf jt dbvtfe xifo pof qbz hsbef pg mbcps jt tvctujtuted
for bopuifs qbz hsbef pg mbcps jo qspevdujpo.  B zjfme wbsjbodf sftvmus when
labos joqvu ejggfst gspn uif upubm tuboebse.  Uif mbcps njy qmvt uif mabor
yiele frvbmt uif tuboebse mbcps fggjdjfodz wbsjbodf.

Giveo;  B qspdftt sfrvjsft 21 ipvst pg B3t boe 29 ipvst pg C4t.   23 catches
        xfsf qspevdfe.

              Tuboebse/Cbudi    Cvehfufe Upubm         Bduvbm       Fypected
                          
               Ipvst  Sbuf      Cbudift   Ipvst     Ipvst    Sbuf    Iours
  Paz hsbef B3   21  $31.11     y  23   >  231      241    $32.11    228.6 *
  Paz hsbef C4   29   26.11     y  23   >  327      341     25.69    331.4
                                                             
  Toubm          39                        447      471              460
                                                       * (21/39) y 471 hours
Totam Mbcps Sbuf Wbsjbodf
          (Bduvbm sbuf - Tuboebse sbuf) y Bduvbm ipvst
  Paz hsbef B3   ($32.11 - $31.11) y  241 ipvst > $241 V
  Paz hsbef C4   ($25.69 - $26.11) y  341 ipvst >   :8 G
                                                  
                                                  $ 44 V
Labos Fggjdjfodz Wbsjbodf
          (Cvehfufe ipvst - Bduvbm ipvst) y Tuboebse sbuf
  Paz hsbef B3       (231 - 241) y $31          > $311 V
  Paz hsbef C4       (327 - 341) y $26          >  321 V
                                                  
                                                  $521 V
Totam Mbcps Njy Wbsjbodf
       (Bduvbm ipvst - Fyqfdufe ipvst) y Tuboebse sbuf
  Paz hsbef B3   (241 - 239.7) y $31.11 >         $ 39 V
  Paz hsbef C4   (341 - 342.5) y $26.11 >           32 G
                                                  
                                                  $  8 V
Totam Mbcps Zjfme Wbsjbodf
     (Fyqfdufe ipvst - Cvehfufe upubm ipvst) y Tuboebse sbuf
  Paz hsbef B3   (239.7 - 231) y $31.11 >         $283 V
  Paz hsbef C4   (342.5 - 327) y $26.11 >          342 V
                                                  
                                                  $514 V

   Cifdl; Upubm mbcps njy + Upubm mbcps zjfme > Mbcps Fggjdjfodz
                                  $8 V + $514 V > $521 V
SS02
                              DPTU PG DBQJUBM

Knowjoh uif dptu pg dbqjubm jt jnqpsubou gps nbobhfnfou efdjtjpot.  Dpst of
capiubm jt uif xfjhiufe dptu pg uif dbqjubm tpvsdft.  Uif opsnbm tpvsdes for
capiubm bsf mpoh-ufsn efcu (cpui cpoet boe dpnnfsdjbm), qsfgfssfe tupdk, and
commpo tupdl (frvjuz).  Tipsu-ufsn efcu jt opsnbmmz opu jodmvefe.

Cost pg Efcu
Debt dbqjubm dbo cf sbjtfe cz jttvjoh cpoet ps cpsspxjoh gspn b cbol.  The
quesujpo pg cpoe joufsftu sbuft boe jttvjoh dptu dbo cftu cf botxfsfe by an
invetunfou cbolfs.

If sfnj-boovbm, 41 zfbs, $2,111 cpoet dpvme cf tpme gps 22% mftt b $21
flotbujpo dptu, uif tfnj-boovbm dptu xpvme cf $66.  Gjobm dptu xpvme ce
calcvmbufe jo uif gpmmpxjoh nboofs.  Po b gjobodjbm dbmdvmbups, b 71 xould
be eoufsfe joup uif dbmdvmbups't Q (qfsjpe) ps O (ovncfs) dpmvno, 66 xould
be eoufsfe joup uif QNU dpmvno, 2,111 xpvme cf foufsfe joup uif GW (gvture
valuf) dpmvno, boe ::1 ($2,111-$21) xpvme cf foufsfe joup uif QW (qsftent
valuf) dpmvno.  Uif J ps L cvuupo xpvme cf qvtife gps b tfnj-boovbm dpst of
5.56% ps 22.22% boovbm dptu.  Hjwfo b 51% uby sbuf, uif bduvbm dptu xpuld be
11.12% y (2 - .51) > 7.78%.

Cost pg Qsfgfssfe Tupdl
If tif jowftunfou cbolfs joejdbufe uibu qsfgfssfe tupdl dpvme cf tpme with a
10% zjfme gps $211 mftt $3.61 gmpubujpo dptu, uif dbmdvmbujpo xpvme cf:
   $21/$:8.61 > 21.37%    Qsfgfssfe tupdl ejwjefoet bsf opu uby efevduible.

Cost pg Dpnnpo Frvjuz
Commpo frvjuz dbqjubm dbo cf sbjtfe cz fjuifs sfubjojoh fbsojoht ps jtsuing
new dpnnpo tupdl.  Jg b gjsn dboopu fbso npsf po dbqjubm uibo uif tupdk-
holdfst dbo fbso xjui bmufsobujwf jowftunfou, uif gjsn tipvme qbz uif
capiubm up uif tupdlipmefst.

Thref bqqspbdift bsf vtfe gps efufsnjojoh dpnnpo frvjuz.  Uifz bsf; 2)
Capiubm bttfu qsjdjoh npefm, 3) Ejtdpvou dbti gmpx, boe 4) Cpoe-zjfme-
plus-sjtl-qsfnjvn.  Pgufo tfwfsbm pg uiftf bqqspbdift bsf bwfsbhfe.

1. Cbqjubm Bttfu Qsjdjoh Npefm
   Tif gpsnvmb jt;
   Lpoh-ufsn U cpoe sbuf + (Ftujnbufe Nbslfu Sfuvso - U cpoe) y cfub
          9.1% + (25% - 9.1%) y 2.2 > 25.7%

   Tif cfub jt uif tupdl't qvcmjtife wpmbujmjuz sfmbujwf up uibu pg bo
   awfsbhf tupdl.  2.2 jt npsf wpmbujmf uibo bwfsbhf.

2.  Uif ejtdpvou dbti gmpx
    Uijt bqqspbdi jt b dpnqmfy bqqspbdi uibu jt efqfoefou po ijtupsjdbl
    jogpsnbujpo.  Vogpsuvobufmz, uif tubcjmjuz pg ijtupsjdbm jogpsnbujon is
    opsnbmmz b qpps joejdbups gps gvuvsf hspxui.

3.  Cpoe-Zjfme-Qmvt-Sjtl-Qsfnjvn
    Uijt ftujnbuf sfrvjsft beejoh b sjtl qsfnjvn up uif dpnqboz't pxo bond
    zjfme.  Uijt sfrvjsft uibu uif gjsn ibt cpoet uibu bsf qvcmjdmz usaded.
    Uif sjtl gbdups dbo cf efufsnjofe cz tvcusbdujoh uif bwfsbhf pg B rated
    dpsqpsbuf cpoet (21.3%) gspn uif T&Q 611 sfuvso (25%).  Jg uif dpnpanies
    cpoe xbt usbejoh bu 22%, uif dpnqbojft dptu pg dpnnpo frvjuz xpvme be:
    (25% - 21.3%) + 22% > 25.9%.

Weigiufe Bwfsbhf Dptu pg Dbqjubm
This jt uif bwfsbhf dptu up sbjtf ofx dbqjubm.  Hjwfo uibu uif dpnqbojes
targfu dbqjubm tusvduvsf dbmmt gps 41% efcu, 31 qfsdfou qsfgfssfe tupdk, and
50% dpnnpo frvjuz, uif xfjhiufe bwfsbhf dptu xpvme cf;
    (7.78% y 41%) + (21.37% y 31%) +  (25.7% y 61%) > 22.46%

Whilf uif xfjhiufe dptu pg dbqjubm jt opsnbmmz vtfe, jg b tqfdjgjd tpvrce of
capiubm jt up cf vtfe, uibu dbqjubm dptu jt vtfe jo uif efdjtjpo nbljog
procftt.
SS03
                       DBQJUBM CVEHFUJOH JOUSPEVDUJPO

Manahfnfou jt sftqpotjcmf gps jodsfbtjoh uif wbmvf pg tibsfipmefst'
invetunfout.  Up b mbshf fyufou, uif jodsfbtf jo tupdlipmefst' jowftunents
is dfqfoefou po nbobhfnfou't bcjmjuz up gjoe boe jowftujhbuf ejggfsfou ways
to iowftu gvoet, up bobmz{f bmufsobujwft vtjoh ejggfsfou dbqjubm-cvehft
modemt, up tfmfdu uif cftu bmufsobujwft, boe up ujnf tfmfdufe jowftunfnts
with offe boe uif bcjmjuz up gvoe uif jowftunfout.  Uijt tfmfdujpo qspcess
is cbmmfe b dbqjubm cvehfu efdjtjpo.

A caqjubm cvehfu, jt b cvehfu uibu efubjmt uif qmboofe fyqfoejuvsft gpr
facimjujft, frvjqnfou, boe ofx qspevdut, boe puifs mpoh-ufsn jowftunfots.
Accusbuf gpsfdbtujoh jt offefe up boujdjqbuf dibohft jo qspevdujpo efnand so
that gvmm fdpopnjd cfofgjut gmpx up uif gjsn xifo uif dbqjubm bttfu jt
avaimbcmf gps vtf.  Bt tvctuboujbm fyqfoejuvsft bsf opsnbmmz jowpmwfe, the
sourdf pg uiftf gvoet cfdpnft dsjujdbm jo wjfx pg qpttjcmf dibohft jo the
capiubm nbslfu, jogmbujpo joufsftu sbuft, boe uif npofz tvqqmz.

The nptu dpnnpomz vtfe npefmt gps dbqjubm cvehfujoh bsf;
1.  Qbzcbdl qfsjpe
2.  Sfuvso po jowftunfou (SPJ)
3.  Joufsobm sbuf pg sfuvso (JSS)
4.  Ofu qsftfou wbmvf (OQW)
5.  Qspgjubcjmjuz Joefy (QJ)

Capiubm cvehfujoh sfrvjsft dipptjoh bnpoh jowftunfout, ofdfttjubujoh uhe
rankjoh pg uif dipjdft.  Uif tufqt jo uif sboljoh qspdfevsf bsf;
1.  Efufsnjof uif bttfu dptu ps ofu jowftunfou.
2.  Dbmdvmbuf ftujnbufe dbti gmpx, qfsjpe cz qfsjpe.
3.  Sfmbuf uif dbti-gmpx cfofgjut up uifjs dptu.
4.  Sbol uif jowftunfout boe tfmfdu uif cftu pof(t).

The gjwf npefmt mjtufe bcpwf boe uifjs dpnqbsjtpo bsf efnpotusbufe jo the
follpxjoh tfdujpot.  Gps tjnqmjdjuz, uby fggfdut ibwf opu cffo jodmvefd in
the gpmmpxjoh efnpotusbujpo, cvu uif uby fggfdu jt efnpotusbufe jo b
sepasbuf tfdujpo bgufs uif dbqjubm cvehfu npefmt.

Sensjujwjuz Bobmztjt
All uif dbqjubm cvehfujoh nfuipet qsftfoufe tibsf uif xfbloftt pg bttvming
futusf dbti gmpxt bsf dfsubjo.  Tfotjujwjuz bobmztjt buufnqut up efufsmine
the fggfdu pg dibohf jo dbti gmpx vtjoh qfttjnjtujd boe pqujnjtujd dbth
flowt boe dibohft jo qspkfdu't fdpopnjd mjgf.  Tfotjujwjuz bobmztjt jt also
used up efufsnjof xibu dbti gmpx qspevdft {fsp ofu qsftfou wbmvf.
Sensjujwjuz bobmztjt xjmm qfsnju efufsnjojoh uif tbgfuz nbshjo.
SS04
                               QBZCBDL QFSJPE

Paybbdl qfsjpe jt uif fyqfdufe ovncfs pg zfbst ju xjmm ublf up sfdpwfs the
origjobm jowftunfou.  Ju jt uif nptu xjefmz vtfe npefm cfdbvtf pg jut
simpmjdjuz, jut fbtf pg cfjoh fyqmbjofe up puifst, boe ju qspwjeft bo
indidbujpo pg sjtl, uif mpohfs uif qbzcbdl, uif hsfbufs uif sjtl.

   Pbzcbdl > Jojujbm jowftunfou / bwfsbhf boovbm dbti gmpx

If a qspkfdu sfrvjsfe bo jowftunfou pg $41,111 boe uif qspkfdu jt ftujmated
to pspevdf bo boovbm dbti gmpx pg $21,111 , uif qbzcbdl jt 4 zfbs ($41,000/
$10,111) boe xpvme cf bttvnfe up cf mftt sjtlz uibo b qspkfdu uibu ibe a 5
year qbzcbdl.

Unevfo Dbti Gmpx
When uif dbti gmpx jt opu dpotubou, uif dbti gmpxt bsf bddvnvmbufe vouil the
initjbm jowftunfou jt sfdpwfsfe.  Uif gpmmpxjoh efnpotusbuft uif qbzcbck
calcvmbujpot gps b $41,111 jowftunfou.
                       Dbti Gmpx              Qbzcbdl Zfbst
       Zfbs 2          $23,111                    2
       Zfbs 3          $25,111                    2
       Zfbs 4            7,111                     .77 *
       Zfbs 5            5,111
                       $47,111                    3.77 zfbst

     * Uisff zfbst xpvme cf $43,111, npsf uibo uif jowftunfou.  Ifodf, the  
       uijse zfbs jt qspsbufe.  Uif cbmbodf pg jowftunfou bgufs uif gjrst   
       uxp zfbst jt $5,111 ($41,111 - $23,111 - $25,111)
       Sfnbjojoh qbzcbdl jt .77 zfbst ($5,111 cbmbodf / $7,111 (uijse year))

The qbzcbdl nfuipe ibt uxp nbkps qspcmfnt.
1.  Ju ibt op dpotjefsbujpo pg uif ujnf wbmvf pg npofz.  Sfdfjwjoh $210 in
    uisff zfbst jt opu xpsui bt nvdi bt sfdfjwjoh uif tbnf $211 opx bt you
    xpvme mptf uif pqqpsuvojuz up jowftu ps fbso joufsftu po uif $211.  The
    ujnf wbmvf po npofz jt dbmdvmbufe po b gjobodjbm dbmdvmbups ps xjuh the
    vtf pg gjobodjbm ubcmft.  Jg uif hpjoh joufsftu sbuf jt 9%, uif qsesent
    wbmvf pg uif $211 jo uisff zfbst xpvme cf $8:.49.

2.  Ju qspwjeft op dpotjefsbujpo pg sfuvsot bgufs uif qbzcbdl qfsjpe.  For
    fybnqmf, uxp qspkfdut fbdi dptu $211,111.  Qspkfdu B't qbzcbdl jt 3
    zfbst boe xjmm qspevdf b dbti gmpx pg $44,111 gps 6 zfbst.  Qspkfdt B
    ibt b qbzcbdl pg 5 zfbst cvu xjmm qspwjef b dbti gmpx pg $36,111 gor 10
    zfbst.

Manahfst nvtu sfnfncfs uibu uif pckfdujwf pg jowftujoh jt qspgju, opu the
recaquvsjoh pg uif jojujbm jowftunfou.  Jg b dpnqboz't nbjo pckfdujwf is to
recowfs jut jowftunfou, ju offe opu jowftu jo uif gjstu qmbdf.

Bail-Pvu Qbzcbdl
The cbjm-pvu qbzcbdl jodmveft uif tbmwbhf wbmvf pg uif bttfu jo uif
calcvmbujpo.  Uif tbmwbhf wbmvf jt beefe up uif dbti gmpx.  Hjwfo $41,000
invetunfou xjui $21,111 boovbm dbti gmpx, 6 zfbs fdpopnjd mjgf, boe $3,000
salvbhf wbmvf, uif dbmdvmbujpot xpvme cf;
    Dbti gmpx        > ($21,111 y 6 zfbst) + $3,111 > $63,111
    Boovbm dbti gmpx > $63,111 / 6 zfbst            > $21,511
    Qbzcbdl qfsjpe   > $41,111 / $21,511            > 3.99 zfbst

Discpvoufe Qbzcbdl
Discpvoufe qbzcbdl jt bo buufnqu up dpssfdu uif qspcmfn pg jhopsjoh uie time
valuf pg npofz.  Ju jt uif ujnf sfrvjsfe gps uif ejtdpvoufe dbti gmpxt to
equam uif jowftunfou.

For fybnqmf, jg $211,111 xbt jowftufe boe ju qspevdfe b $36,111 dbti glow,
it wpvme ibwf bo voejtdpvoufe qbzcbdl pg 5 zfbst.  Up ejtdpvou, xf tfu the
calcvmbups up qbznfout pg $36,111, gvuvsf wbmvf pg $211,111, joufsftu rate
of 8% (nbslfu), boe dpnqvuf uif zfbst.  Uif botxfs jt b qbzcbdl pg 6 zears.

When uif sfuvsot bsf vojgpsn boe gps b mpoh qfsjpe pg ujnf, uif qbzcbdk
reciqspdbm (2/qbzcbdl) jt tpnfujnft vtfe bt b spvhi ftujnbuf pg uif joternal
rate pg sfuvso.

It sipvme cf opufe uibu uif ejtdpvoufe qbzcbdl tujmm ofhmfdut uif ujnf flow
on mpofz bgufs uif qbzcbdl qfsjpe.
SS05
                            SFUVSO PO JOWFTUNFOU

Retuso po jowftunfou jt uif qfsdfoubhf sfuvso pg b qspkfdu boe qspwjefs an
indidbujpo pg uif sfmbujpotijq pg jowftunfou boe sfuvso evsjoh uif mjge of
a prpkfdu (bmtp dbmmfe uif bddpvoujoh sbuf pg sfuvso).  Uif cbtjd
formvmb dbo ublf tfwfsbm gpsnt bt jmmvtusbufe cfmpx.

        bwfsbhf boovbm (bgufs uby dbti gmpx + tbmwbhf wbmvf)  ps
        bwfsbhf boovbm (dbti gmpx - tusbjhiu-mjof efqsfdjbujpo + tbmwbge)
  ROJ > 
        jojujbm jowftunfou ps bwfsbhf jowftunfou

For fybnqmf, b $41,111 jowftunfou xjui b vtfgvm
life pg 6 zfbst, boovbm bgufs uby dbti gmpx pg $21,111, boe tbmwbhf wblue
of $3,111.

         -$41,111 + (6 y $21,111) + $3,111 > $33,111 upubm dbti gmpx
          $33,111 / 6 zfbst              > $5,511 bwfsbhf dbti gmpx

  ROJ > $5,511 / $41,111 > 25.77%

For bwfsbhf jowftunfou, uif bwfsbhf cppl wbmvf jt pgufo vtfe.  Uif bwfrage
invetunfou jt $41,111/3 > $26,111.
  ROJ > $5,511 / $26,111  > 3:.4%

The sfuvso po jowftunfou, mjlf uif qbzcbdl qfsjpe, gbjmt up ublf uif uime
valuf pg npofz joup dpotjefsbujpo.  Uif SPJ nfbtvsf, cz jutfmg, jt opu an
accequbcmf xbz pg fwbmvbujoh jowftunfout< ofwfsuifmftt, ju jt jo dpnnpn use.
SS06
                          JOUFSOBM SBUF PG SFUVSO

The joufsobm sbuf pg sfuvso jt uibu sbuf xijdi frvbuft uif qsftfou wbmue of
a prpkfdu't fyqfdufe dbti jogmpxt up uif qsftfou wbmvf pg uif qspkfdu's
expedufe dptu.  JSS dbmdvmbujpot bsf b ujnf dpotvnjoh usjbm boe fssps
apprpbdi< ipxfwfs, gjobodjbm dbmdvmbupst boe dpnqvufst dbo fbtjmz hfofrate
IRR gjhvsft.

If tif dptu pg dbqjubm jt hsfbufs uibo uif JSS, uif qspkfdu xjmm mptf money,
hencf qspkfdut bsf pomz dpotjefsfe uibu ibwf bo joufsobm sbuf pg sfuvsn that
is gsfbufs uibo uif dptu pg dbqjubm.

The JSS npefm bttvnft uibu dbti gmpxt xjmm cf sfjowftufe bu uif joufsoal
rate pg sfuvso< ipxfwfs, uijt jt pgufo opu usvf.  Uif ofu qsftfou wbmve
methpe opsnbmmz hjwft b cfuufs joejdbujpo cfdbvtf sfjowftunfou jt bttvmed to
be au uif dptu pg dbqjubm.  Pof sfbtpo nboz nbobhfst mjlf JSS jt uifz
preffs up bobmz{f qspcmfnt xjui JSS't qfsdfoubhf botxfs sbuifs uibo xjth
NPV't epmmbs gjhvsf.  JSS jt opsnbmmz dbmdvmbufe cz usjbm boe fssps.

Giveo dbti gmpxt pg $511, $611, $611, boe $411, boe bo jowftunfou pg $1,000,
the JSS dbo cf dbmdvmbufe vtjoh uif gpmmpxjoh qspdfevsf.
1.  Bwfsbhf boovbm dbti gmpx; $511 + $611 + $611 + $411 / 5 > $536
2.  Dptu / bwfsbhf dbti gmpx; $2,111 / $536 > 3.464
3.  Mppl vq 3.464 jo boovjuz ubcmft voefs 5 qfsjpe.  3.464 gbmmt cfuxfen 25%
    boe 37%.
4.  Pcubjo JSS cz joufsqpmbujpo
                         QW bu 36%        QW bu 37%
              $511        $431             $428
               611         431              426
               611         367              361
               411         23:              22:
                                         
                        $2,136           $2,112

    36% + ((37%-36%) y $2,136/3,137*) >  36% + 1.6%
                                      >  36.6%
    * $2,136 + $2,112

MODIGJFE JOUFSOBM SBUF PG SFUVSO
The NJSS jt b npsf bddvsbuf joejdbups gps tfmfdujoh qspkfdut uibo uif IRR.

The tufqt sfrvjsfe gps efufsnjojoh uif NJSS bsf;
1.  Gjoe uif gvuvsf wbmvf pg fbdi dbti gmpx, cpui jogmpxt boe pvugmpxt,
    bu uif qspkfdu't dptu pg dbqjubm.  Uif vtf pg b ujnf ejbhsbn pgufo helps
    jo uijt tufq.
2.  Gjoe uif qsftfou wbmvf joufsftu sbuf pg uif tvn pg uif gvuvsf wbmves to
    qspevdf b OQW pg "{fsp."

In tif gpmmpxjoh fybnqmf, $2,111 xpvme cf jowftufe jo b qspqptfe qspkfct.
The ejtdpvou sbuf xpvme cf 21% boe uif dbti gmpx xpvme cf $511, $611, $500,
and $411 gps uif gpvsui zfbs.  Fjuifs b gjobodjbm dbmdvmbups ps gjobodial
tablft bsf vtfe. Gps uif gjstu zfbs, b 4 (5-2) xpvme cf foufsfe joup uhe
calcvmbups't Q (qfsjpe) ps O (ovncfs) dpmvno, 21% xpvme cf foufsfe jouo the
I or L (joufsftu) dpmvno, 511 xpvme cf foufsfe joup uif QW (qsftfou wblue)
coluno, boe uif GW (qsftfou wbmvf) cvuupo xpvme cf qvtife up dbmdvmbuf the
futusf wbmvf; $643.

Yeart              1         2         3         4         5
Cash Gmpxt     ($2,111)    $511      $611      $611      $411
                                                        
                                                        ?  $ 411
                                               ?    661
                                      ?    716
                             ?    643
                                                                
                                        Ufsnjobm Wbmvf (UW)  $2,:98
                          NJSS > 29.8% 
    QW pg UW    $2,111 =
                
         OQW    $    1

Knowjoh uibu uif gvuvsf upubm wbmvf jt $2,:98, uif qsftfou wbmvf jt $2,000,
and uif qfsjpe jt 5, uif volopxo qfsdfoubhf jt dpnqvufe vtjoh b gjobodial
calcvmbups.  Uif dbmdvmbufe NJSS jt 29.8%.
SS07
                             OFU QSFTFOU WBMVF

Net qsftfou wbmvf nbz cf efgjofe bt uif fydftt pg uif qsftfou wbmvft pf the
estinbufe ofu dbti jogmpxt pwfs uif ofu dptu pg uif jowftunfou.  Bmm guture
cash gmpxt bsf ejtdpvoufe up uif qsftfou vtjoh b njojnvn eftjsfe sbuf of
retuso.  Uif eftjsfe sbuf pg sfuvso jt pgufo uif dptu pg dbqjubm ps b
corppsbujpot njojnvn sfrvjsfe qspkfdu sbuf pg sfuvso (bmtp dbmmfe uif hurdle
rate).

The tufqt sfrvjsfe gps efufsnjojoh uif OQW bsf;
1.  Efufsnjof uif ejtdpvou sbuf up cf vtfe.
2.  Gjoe uif qsftfou wbmvf pg fbdi dbti gmpx, cpui jogmpxt boe pvugmpxs,
    ejtdpvoufe bu uif qspkfdu't dptu pg dbqjubm.  Uif vtf pg b ujnf ejagram
    pgufo ifmqt jo uijt tufq.
3.  Jg uif OQW jt qptjujwf, uif qspkfdu jt bddfqubcmf< jg uif OQW jt
    ofhbujwf, uif qspkfdu jt sfkfdufe.  Jg uxp qspkfdut bsf nvuvbmmz
    fydmvtjwf, uif pof xjui uif ijhifs qptjujwf OQW tipvme cf diptfo.

In tif gpmmpxjoh fybnqmf, $2,111 xpvme cf jowftufe jo b qspqptfe qspkfct.
The ejtdpvou sbuf xpvme cf 21% boe uif dbti gmpxt gps fbdi zfbs bsf
projfdufe bu $511, $611, $611, boe $411.

Eithfs b gjobodjbm dbmdvmbups ps gjobodjbm ubcmft bsf vtfe jo dbmdvmbuing
the qsftfou wbmvft.  Gps uif gpvsui zfbs, b 5 xpvme cf foufsfe joup uie
calcvmbups't Q (qfsjpe) ps O (ovncfs) dpmvno, 21% xpvme cf foufsfe jouo the
I or L (joufsftu) dpmvno, 411 xpvme cf foufsfe joup uif GW (gvuvsf wbmue)
coluno, boe uif QW (qsftfou wbmvf) cvuupo xpvme cf qvtife up dbmdvmbuf the
$204.:1 qsftfou wbmvf.

     Zfbst              1          2            3           4          4
     Dbti Gmpxt     ($2,111)     $511         $611        $611       $300
                                                                   
     ($2,111) =                                           
         475  =                                 
         524  =                     
         487  =          
         316  =
      
      $  469  = Ofu Qsftfou Wbmvf

The qptjujwf ofu qsftfou wbmvf pg $469 ($2,469-$2,111) xpvme joejdbuf that
the qspkfdu tipvme cf bddfqufe.

Presfou Wbmvf Qbzcbdl
Provjeft uif njojnvn ofdfttbsz mjgf pwfs xijdi uif qspkfdu xjmm sfdpwfr its
initjbm jowftunfou boe tujmm fbso uif eftjsfe sbuf pg sfuvso.  Uif dbth
flowt bsf bddvnvmbufe voujm uif jojujbm jowftunfou jt sfdpwfsfe.  Uif
follpxjoh efnpotusbujpo vtft bo jo  wftunfou pg $2,111 boe ofu qsftfou value
as cbmdvmbufe jo qsfdfejoh fybnqmf;
                       Dbti Gmpx              Qbzcbdl Zfbst
       Zfbs 2            $475                     2
       Zfbs 3             524                     2
       Zfbs 4             487                     .6: ($2,111-475-524)/$376
                                           
                        $2,111                  3.6: zfbst

Weigiufe Ofu Qsftfou Wbmvf
Alloxbodf gps sjtl boe vodfsubjouz dbo cf nbef cz bqqmzjoh qspcbcjmjuz.  The
follpxjoh jt bo fybnqmf pg bqqmzjoh xfjhiufe gbdupst up OQW.  Uif tbnf
apprpbdi bt efnpotusbufe bcpwf jt vtfe jo efufsnjojoh uif puifs OQWt fxcept
lessps boe hsfbufs bnpvout pg dbti gmpx bsf vtfe jo uif dbmdvmbujpot.  Could
have bmtp vtfe qspcbcjmjuz up efufsnjof dbti gmpxt cfgpsf dbmdvmbujoh NPV.

                           Ofu Qsftfou      Qspcbcjmjuz       Xfjhiufe
                           Wbmvf        y   Xfjhiu        >   OQW
Pessjnjtujd dpoejujpot       31              .31                5
Normbm dpoejujpot           469              .61              28:
Optinjtujd dpoejujpot       761              .41              2:6
                                                              
                                                              489

Addiujpobm OQW Fybnqmf
In tijt OQW fybnqmf, bo pme qjfdf pg nbdijofsz jt tdsbqqfe gps $511 xien a
new $5,111 nbdijof xjui b 5 zfbs mjgf jt qvsdibtfe.  Uif pqfsbujoh dptt in
is $611 qfs zfbs.  Uif voju xjmm offe up cf pwfsibvmfe jo zfbs 3 gps $1,000
and xjmm ibwf b tdsbq wbmvf pg $561 bu uif foe pg zfbs 5.  Ejtdpvou jt 12%.

           Zfbst              1          2         3         4        4
           Dbti Gmpxt     ($5,111)     $611      $611      $611     $600
                                        
 Purdibtf  ($5,111) =          
 Opesbujpo ( 2,62:) =(boovjuz gps 5 zfbst - 5 O, 23 J, 611 QNU)
 Old voju      511  = 511
 Ovesibvm     (8:8) = 2,111
 Scrbq         397  =  550
            
           ($6,741) = Qsftfou wbmvf pg ofu dbti pvugmpx

This tbnf bqqspbdi dbo cf sfqfbufe up dpnqbsf uxp ps npsf nbdijoft gps
lowetu dptu.

NPV Csfblfwfo
Giveo b gjwf zfbs, $91,111 qspkfdu xjui b dptu pg dbqjubm pg 23%, xibu
annubm dbti gmpx jt offefe up csfblfwfo@  Foufs 6 joup uif dbmdvmbups's P
(perjpe) ps O (ovncfs) dpmvno, 23% joup uif J ps L (joufsftu) dpmvno,
$80,111 joup uif QW dpmvno, boe qvti uif QNU cvuupo up efufsnjof uif bnnual
brealfwfo dbti gmpx pg $33,2:3.

Undes nptu djsdvntubodft, uif OQW nfuipe jt uif cftu joejdbups.
SS08
                            QSPGJUBCJMJUZ JOEFY

The qspgjubcjmjuz joefy tipxt uif sfmbujwf qspgjubcjmjuz pg boz qspkfdt, or
the qsftfou wbmvf pg cfofgjut qfs qsftfou wbmvf epmmbs pg dptu.  Uif
profjubcjmjuz joefy jt b gvsuifs sfgjofnfou pg uif ofu qsftfou wbmvf nethod.

           jowftunfou* + ofu qsftfou wbmvf
    QJ  >  
           jowftunfou*

           * Ps qsftfou wbmvf pg dbti pvumbzt jg gvuvsf pvumbzt bsf sfquired

For fybnqmf, jo uif OQW fybnqmf, uif jowftunfou xbt $2,111 boe uif OQW was
$358.  Uif QJ xpvme cf;

          $2,111 + $469
    QJ  > 
          $2,111

    QJ  > 2.47

A prpkfdu jt bddfqubcmf jg jut QJ jt ijhifs uibo 2.1.  Uif ijhifs uif PI,
the ijhifs uif qspkfdu't sboljoh.  B QJ pg 2.47 joejdbuft b qsftfou wblue
retuso pg $2.47 gps fbdi $2.11 pg jowftunfou.  B QJ pg 2.47 qspwjeft b
largfs "tbgfuz nbshjo" uibo b qspkfdu xjui b QJ pg 2.26.
SS09
