Wilson's Antiques Is Considering a Project with an Initial Cost

question 51

Multiple Choice

Wilson's Antiques is considering a project with an initial cost today of $10,000.The project has a life of 2 years with cash inflows of $6,500 a year.Should the firm 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 at a discount rate of 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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Definitions:

Economic Impact

The effect of an event, policy, or market condition on the economy, affecting factors such as employment, income, and economic growth.

Individualism

The principle or habit of being independent and self-reliant, often prioritizing personal goals over those of a group.

Gender Neutrality

The concept of designing and providing services or facilities that do not discriminate based on gender.

Product Design

The process of creating and developing new products by defining their features, specifications, and aesthetics to meet customer needs and preferences.