Revised Shockley, Chapter 1 Answers:
1. a. Expected Cash Inflow: 200*{25%*[$40.00/(1+10%) + $45.00/(1 + 10%)2]
2. a. The off campus facility provides more flexibility because it is more
b. If the real estate value or the revenues generated from leasing to someone
3. a. Static NPV cannot capture the flexibility of the flexible plant.
4. a. It is justifiable because the flexibility allows an option to grow the thermal
5. a. The NPV analysis of building the plant in India is more consistent with
b. If the NPV of building the plant is very positive or is based on
c. The direct cost of importing one more year must be compared to the
6. a. A peaker is turned on whenever the demand for energy becomes so large
8. a. The value of the staged strategy increases because the launch of the
b. This situation hurts both strategies, but hurts the strategy of launching all
c. Because the Venezuelan economy is booming, it may make sense to
9. a. If large clients are not representative of the entire client base, there may be
b. If large clients are representative of the entire client base, the system
c. The benefit to the staged implementation allowed the firm to learn about
10. a. One-line plant NPV:
b. The NPV of the expandable plant:
11. a. The machinery cannot be priced as if the purchase is made all at once,
12. Financial market investments are traded securities in which the market will