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

question 27

Multiple Choice

Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should Wilson's decide to wait one year to commence this project, the initial cost will increase by 5 percent and the cash inflows will increase to $7,500 a year. What is the value of the option to wait if the applicable discount rate is 10 percent?

• A) $1,006.76
• B) $1,235.54
• C) $1,509.28
• D) $1,606.76
• E) $1,735.54

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