Wilson's Antiques Is Considering a Project That Has an Initial

question 27

Multiple Choice

Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should Wilson's decide to wait one year to commence this project, the initial cost will increase by 5 percent and the cash inflows will increase to $7,500 a year. What is the value of the option to wait if the applicable discount rate is 10 percent?

• A) $1,006.76
• B) $1,235.54
• C) $1,509.28
• D) $1,606.76
• E) $1,735.54

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Definitions:

Nitrate

A polyatomic ion with the chemical formula NO3-, commonly found in fertilizers and an essential nutrient for plant growth.

Plants

Multicellular organisms that typically produce their own food through photosynthesis and have cell walls made of cellulose.

Uptake

The absorption or intake of substances by the cells or biological membranes.

Nutrients

Essential substances that organisms need to acquire from their environment to maintain health, growth, and reproduction.