You Are Considering a Project Which Has Been Assigned a Discount

question 122

Multiple Choice

You are considering a project which has been assigned a discount rate of 14 percent. If you start the project today, you will incur an initial cost of $1,200 and will receive cash inflows of $600 a year for
Three years. If you wait one year to start the project, the initial cost will rise to $1,250 and the cash
flows will increase to $645 a year for three years. What is the value of the option to wait?

• A) $10.16
• B) $14.87
• C) $19.00
• D) $24.08
• E) $27.03

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Definitions:

Efficacy

The ability of a product or treatment to produce a desired effect under ideal and controlled conditions.

Placebos

Inactive substances or treatments used in controlled experiments to test the efficacy of therapeutic interventions, serving as a control group to the active treatments.

Headache Monitoring

The systematic tracking of headache occurrence, intensity, and duration to aid in diagnosis and treatment planning.

Relaxation Therapies

Techniques or practices designed to reduce stress and anxiety, thereby promoting physical and mental well-being; examples include meditation, deep-breathing exercises, and progressive muscle relaxation.