From the course: Corporate Finance Foundations
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Example: Buying light switches
From the course: Corporate Finance Foundations
Example: Buying light switches
- I was once a dean in the business school at BYU. That's the hardest job I ever had. I dealt with a bunch of issues, some more fun than others. One issue I dealt with was the decision to put motion detecting light switches in faculty offices. Now, the obvious benefit of putting motion detecting light switches in offices is if there's no motion in the office, the lights turn off. No need lighting a room that has no one in it. No need paying to light a room that has no one in it. But these light switches cost money and they cost money now. The cost savings from reduced power consumption comes in the future. The cost outflow is now. The switches we were looking at at the time cost about $20 per switch. These were some nice motion detecting light switches. Our forecast was that these switches would last about 15 years, and that they would save us in energy costs about 12 cents per switch per month. That means the cost savings for each switch would be 12 cents times 12 months per year…
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