Solved

The Board of Directors of the Four Forks Generating Corporation

question 4

Multiple Choice

The board of directors of the Four Forks Generating Corporation is meeting to consider the construction of a new electrical generation facility near the Four Forks River. Director Appleton prefers a coal-burning plant because it promises to be the most profitable alternative. Over the short term at least, a coal plant will be by far the least expensive facility to build and operate. Coal is cheap and the considerable pollution from the plant won't affect anything within hundreds of miles from the plant.

Director Estrella wants a nuclear plant to be located 30 miles upriver from the biggest city in the area. Nuclear power is cleaner than coal. Completely safeguarding the community against accidents in the plant or the disposal of toxic waste could be very expensive. However, Estrella has discovered that the job can be done much more cheaply by cutting some corners–while still strictly following all laws–and creating some additional risk for the community.

Director Jossleman supports the most expensive option of the three–she wants a wind farm to be built along the banks of the river on top of a ridge. The wind turbines produce absolutely no pollution and pose no threat to the community or the environment. They are expensive to build and to operate at the current time because they require elaborate back-up systems to function when the wind isn't blowing.

-Suppose Director Jossleman proposes building a wildlife preserve near the wind farm for the local community.What is Josselman demonstrating in her proposal?

Definitions:

Sum-Of-The-Years'-Digits

An accelerated depreciation method that applies a decreasing fraction to the depreciable cost of an asset over its useful life.

Depreciation Expense

An accounting method for allocating the cost of a tangible asset over its useful life, reflecting the asset's decrease in value over time.

Impairment Review

An examination of assets to determine if their carrying value exceeds their recoverable amount, potentially leading to an impairment loss.

Property, Plant

Property, Plant, and Equipment (PP&E) are long-term tangible assets used in the operation of a business and not intended for sale.