TitmanFinMan12e_Chapter 12_Study Question Solutions

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1、12-4Titman/Keown/Martin•FinancialManagement,TwelfthEditionChapter12SolutionstoStudyQuestions12-1.OneobviouspossibilityisthatToyotaisbeingpaidforthetechnology.Althoughwedonotknowthespecificsofthefinancialarrangementbetweenthetwoautomakers,thereprobablyissome

2、typeofroyaltypaymentinvolved.ThismeansthateverytimeFordsellsahybridFusionithastopayToyotaafeefortheuseofitstechnology.Moreover,ifthetechnologybecomesthedominanttechnologyintheindustrywithotherautomakersmakingsimilararrangementsthenToyotamakesmoneyeachtimeah

3、ybridisused.12-2.Fortheairlinetoanalyzethedecisiontoincludein-flightInternetaccess,itneedsateamthatincludestechnicalstaffsuchasengineerstoaddressthecostofinstallingandmaintainingtheservice,marketingpersonneltoestimatecustomeracceptanceratesandrevenues,andaf

4、inancialanalysttocombinethevariouscostandrevenueestimatesintoaprojectevaluation.12-3.Overheadexpensessuchasthecostofheat,light,andrentoccurregardlessofwhetherweacceptorrejectaparticularproject.Forthisreason,overheadexpensesaregenerallynotarelevantconsiderat

5、ionwhenevaluatingprojectcashflows.Note,however,thattherearesomeinstancesinwhichoverheadexpensesmaychangewithanewinvestment.Forexample,ifthefirmaddsanewshifttothefirm’soperationsthenitsenergycostswillincreaseduringthenewshiftandwouldthereforebearelevant“incr

6、emental”expenseofthedecision.12-4.Manytimesanewprojectinvolvesanadditionalinvestmentinworkingcapital.Additionalworkingcapitalarisesoutofthefactthatcashinflowsandoutflowsfromtheoperationsofaninvestmentareoftenmismatched.Thatis,inventoryispurchasedandpaidforb

7、eforeitissold.Forexample,thismaytaketheformofnewinventorytostockasalesoutletoranadditionalinvestmentinaccountsreceivableresultingfromadditionalcreditsales.Someofthefundsneededtofinancetheincreaseininventoryandaccountsreceivablemaycomefromanincreaseinaccount

8、spayablethatariseswhenthefirmbuysgoodsoncredit.Asaresult,theactualamountofnewinvestmentrequiredbytheprojectisdeterminedbythedifferenceinthesumoftheincreaseinaccountsreceivablesplusinventorieslesstheinc