You Are Considering a Project That Has Been Assigned a Discount

question 78

Multiple Choice

You are considering a project that has been assigned a discount rate of 8 percent.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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Definitions:

Quintet

A term often used in NMR spectroscopy to describe a signal pattern consisting of five peaks, indicative of the surrounding nuclear environment in molecules.

Triplet

A term in quantum physics describing a system or state with three closely related energy levels or particles.

Quartet

In NMR spectroscopy, a signal pattern of four peaks indicating the splitting of a signal due to coupling with three equivalent protons.

Doublet

In spectroscopy, a pair of closely spaced energy levels or lines, often observed in the spectra of atoms and molecules.