You Are Considering a Project Which Has Been Assigned a Discount

question 47

Multiple Choice

You are considering a project which has been assigned a discount rate of 8%.If you start the project today, you will incur an initial cost of €480 and will receive cash inflows of €350 a year for three
Years.If you wait one year to start the project, the initial cost will rise to €520 and the cash flows
Will increase to €385 a year for three years.What is the value of the option to wait?

• A)€15.23
• B)€17.08
• C)€18.67
• D)€20.20
• E)€50.20

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Definitions:

Arteriovenous Shunts

Connections created between arteries and veins, often used for hemodialysis in patients with kidney failure.

Mastectomy

A surgical operation to remove one or both breasts partially or completely, often as a treatment for breast cancer.

Heart Attack

A medical emergency where the blood flow to the heart is suddenly blocked, leading to damage or death of heart muscle.

Piloerection

It refers to the involuntary erection of hairs on the skin, caused by the contraction of tiny muscles at the base of hair follicles, often in response to cold or fear.