A Project Has Been Assigned a Discount Rate of 12

question 57

Multiple Choice

A project has been assigned a discount rate of 12 percent.If the project starts immediately,it will have an initial cost of $480 and cash inflows of $350 a year for three years.If the start is delayed one year,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)$.70
• B)$1.08
• C)$1.67
• D)$2.20
• E)$.20

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