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Rosita's is considering a project with a discount rate of 9 percent. If the firm starts...

Rosita's is considering a project with a discount rate of 9 percent. If the firm starts the project today, it will incur an initial cost of $32,260 and will receive cash inflows of $18,320 a year for 4 years. If the firm waits 1 year to start the project, the initial cost will decrease to $30,500, the cash flows will increase to $18,640 a year for 4 years, and the discount rate will decrease to 8.5 percent. What is the value of the option to wait?

Multiple Choice

  • $1,489.20

  • $848.29

  • $1,471.42

  • $1,071.58

  • $681.04

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