Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 10, Problem 28QP
Issues in Capital Budgeting [LO1] The debate regarding CFLs versus incandescent bulbs (see Problems 25–27) has even more wrinkles. In no particular order:
1. Incandescent bulbs generate a lot more heat than CFLs.
2. CFL prices will probably decline relative to incandescent bulbs.
3. CFLs unavoidably contain small amounts of mercury, a significant environmental hazard, and special precautions must be taken in disposing of burned-out units (and also in cleaning up a broken lamp). Currently, there is no agreed-upon way to recycle a CFL. Incandescent bulbs pose no disposal/breakage hazards.
4. Depending on a light’s location (or the number of lights), there can be a nontrivial cost to change bulbs (i.e., labor cost in a business).
5. Coal-fired power generation accounts for a substantial portion of the mercury emissions in the U.S., though the emissions will drop sharply in the relatively near future.
6. Power generation accounts for a substantial portion of CO2 emissions in the U.S.
7. CFLs are more energy and material intensive to manufacture. On-site mercury contamination and worker safety are issues.
8. If you install a CFL in a permanent lighting fixture in a building, you will probably move long before the CFL burns out.
9. Another lighting technology based on light-emitting diodes (LEDs) exists and is improving. LEDs are currently much more expensive than CFLs, but costs are coming down. LEDs last much longer than CFLs and use even less power. Plus, LEDs don’t contain mercury.
Qualitatively, how do these issues affect your position in the CFL versus incandescent lightbulb debate? Some countries have banned incandescent bulbs. Does your analysis suggest such a move is wise? Are there other regulations short of an outright ban that make sense to you?
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Question 6
What of the following is a drawback of using the payback method to evaluate capital projects?
O Payback can result in value-decreasing decisions
O Payback does not consider the time value of money
O Payback does not consider risk
O Payback does not consider all the cash flows of the project
O All choices are correct
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QUESTION 1
Which is not an issue in the context of Fintech regulation?
O Increased technological costs.
O Weighing the costs and benefits of regulation for consumers and innovation.
O Decentralizing Fintech regulation, which is harder to override by centralized, federal regulation.
O Supporting Fintech companies with government funding.
O Creating "safe spaces" for Fintech companies to test our their businesses.
QUESTION 2
Excess reserves are Insurance from deposit outflow. Suppose you hold 14 million required reserves and 46 million
excess reserves at the central bank. The total Interest payment on reserves from the central bank is 0,3%. If you do not
hold your excess reserves at the bank, you may take loans and earn 4% in average. What is the cost of holding excess
reserve at the central bank?
O $60.000,000
O $1.665,000
O $1.702.000
O $555.000
O $518.000
which of the following is an example of unsystematic risk?
decrease income tax for all company
soft tech won a new sales
contract increase in inflammation rate
deccrease in government bond rate
Chapter 10 Solutions
Fundamentals of Corporate Finance
Ch. 10.1 - What are the relevant incremental cash flows for...Ch. 10.1 - What is the stand-alone principle?Ch. 10.2 - Prob. 10.2ACQCh. 10.2 - Prob. 10.2BCQCh. 10.2 - Explain why interest paid is not a relevant cash...Ch. 10.3 - What is the definition of project operating cash...Ch. 10.3 - For the shark attractant project, why did we add...Ch. 10.4 - Prob. 10.4ACQCh. 10.4 - How is depreciation calculated for fixed assets...Ch. 10.5 - Prob. 10.5ACQ
Ch. 10.5 - Prob. 10.5BCQCh. 10.6 - Prob. 10.6ACQCh. 10.6 - Under what circumstances do we have to worry about...Ch. 10 - Prob. 10.1CTFCh. 10 - What should NOT be included as an incremental cash...Ch. 10 - Prob. 10.3CTFCh. 10 - An asset costs 24,000 and is classified as...Ch. 10 - Prob. 10.5CTFCh. 10 - Prob. 10.6CTFCh. 10 - Opportunity Cost [LO1] In the context of capital...Ch. 10 - Depreciation [LO1] Given the choice, would a firm...Ch. 10 - Net Working Capital [LO1] In our capital budgeting...Ch. 10 - Stand-Alone Principle [LO1] Suppose a financial...Ch. 10 - Prob. 5CRCTCh. 10 - Cash Flow and Depreciation [LOI] When evaluating...Ch. 10 - Capital Budgeting Considerations [LOI] A major...Ch. 10 - Prob. 8CRCTCh. 10 - Prob. 9CRCTCh. 10 - Prob. 10CRCTCh. 10 - Relevant Cash Flows [LO1] Parker Slone, Inc., is...Ch. 10 - Prob. 2QPCh. 10 - Calculating Projected Net Income [LO1] A proposed...Ch. 10 - Calculating OCF [LO1] Consider the following...Ch. 10 - OCF from Several Approaches [LO1] A proposed new...Ch. 10 - Calculating Depreciation [LO1] A piece of newly...Ch. 10 - Calculating Salvage Value [LO1] Consider an asset...Ch. 10 - Calculating Salvage Value [LO1] An asset used in a...Ch. 10 - Calculating Project OCF [LO1] Quad Enterprises is...Ch. 10 - Calculating Project NPV [LO1] In the previous...Ch. 10 - Prob. 11QPCh. 10 - NPV and Modified ACRS [LO1] In the previous...Ch. 10 - Project Evaluation [LO1] Dog Up! Franks is looking...Ch. 10 - Project Evaluation [LO1] Your firm is...Ch. 10 - Prob. 15QPCh. 10 - Calculating EAC [LO4] A five-year project has an...Ch. 10 - Calculating EAC [LO4] You are evaluating two...Ch. 10 - Calculating a Bid Price [LO3] Romo Enterprises...Ch. 10 - Cost-Cutting Proposals [LO2] Warmack Machine Shop...Ch. 10 - Comparing Mutually Exclusive Projects [LO1] Lang...Ch. 10 - Prob. 21QPCh. 10 - Prob. 22QPCh. 10 - Prob. 23QPCh. 10 - Comparing Mutually Exclusive Projects [LO4]...Ch. 10 - Equivalent Annual Cost [LO4] Compact fluorescent...Ch. 10 - Break-Even Cost [LO2] The previous problem...Ch. 10 - Break-Even Replacement [LO2] The previous two...Ch. 10 - Issues in Capital Budgeting [LO1] The debate...Ch. 10 - Replacement Decisions [LO2] Your small remodeling...Ch. 10 - Replacement Decisions [LO2] In the previous...Ch. 10 - Calculating Project NPV [LO1] You have been hired...Ch. 10 - Prob. 32QPCh. 10 - Calculating Required Savings [LO2] A proposed...Ch. 10 - Prob. 34QPCh. 10 - Calculating a Bid Price [LO3] Your company has...Ch. 10 - Replacement Decisions [LO2] Suppose we are...Ch. 10 - Conch Republic Electronics, Part 1 Conch Republic...Ch. 10 - Conch Republic Electronics, Part 1 Conch Republic...Ch. 10 - Conch Republic Electronics, Part 1 Conch Republic...Ch. 10 - Conch Republic Electronics, Part 1 Conch Republic...
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