You Are Considering a Project Which Has Been Assigned a Discount

question 46

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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