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

question 42

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% 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%?

• 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:

Social Facilitation

The enhancement of a person's performance on simple or well-learned tasks in the presence of others.

Revenge

The act of inflicting harm or punishment on someone in retaliation for harm they have caused; motivated by a desire for justice or vengeance.

Normative Social Influence

A type of social influence that leads to conformity, where an individual changes their behavior in order to be accepted or liked by a group.

Distortion

The alteration of the original shape or other characteristic of something, often in a way that makes it appear misleading or unrealistic.