Consider a Project That Costs $1 Million Today but Yields

question 23

Multiple Choice

Consider a project that costs $1 million today but yields no returns for several years.Once the project becomes productive,it yields $250,000 annually forever.Suppose two firms are examining this project,a Japanese firm with a cost of capital of 7% and a U.S.firm with a cost of capital of 13%.Approximately how many more years than the U.S.firm would the Japanese firm be willing to wait until the project starts generating cash?

• A)14 years
• B)5 years
• C)24 years
• D)3 years

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