Games Unlimited Inc

question 11

Multiple Choice

Games Unlimited Inc.is considering a new game that would require an investment of $21.0 million.If the new game is well received,then the project would produce cash flows of $9.5 million a year for 3 years.However,if the market does not like the new game,then the cash flows would be only $6.8 million per year.There is a 50% probability of both good and bad market conditions.The firm could delay the project for a year while it conducts a test to determine if demand would be strong or weak.The project's cost and expected annual cash flows would be the same whether the project is delayed or not.If the WACC is 9.6%,what is the value (in thousands) of the investment timing option? Do not round intermediate calculations.
?

• A) $1,274
• B) $1,083
• C) $1,592
• D) $1,019
• E) $1,147

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Definitions:

Economic Conditions

The state of the economy at a given time, encompassing such factors as inflation rates, employment levels, and GDP.

Proletariat

Workers; those who have no means of production of their own and so are reduced to selling their labor power in order to live.

Selling Labor

The act of offering one's work or services in exchange for compensation, typically in the form of wages or salary.

Social Group

A collection of individuals who interact with each other based on shared experiences, interests, or goals, forming a cohesive unit within society.