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

question 32

Multiple Choice

Wilson's Antiques is considering a project that has an initial cost today of $14,000.The project has a life of 2 years with cash inflows of $9,500 a year.Should Wilson's decide to wait 2 years to commence this project,the initial cost will increase by 3 percent and the cash inflows will increase to $11,000 a year.What is the value of the option to wait if the applicable discount rate is 12 percent?

• A)$1,269.26
• B)$1,335.54
• C)$2,115.08
• D)$1,606.76
• E)$1,935.54

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Definitions:

Competitiveness of Markets

The degree of competition within a market, influencing pricing, product quality, and innovation.

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Natural Monopoly

A market condition where a single firm can supply a product or service at a lower cost than any potential competitor, often due to economies of scale.