Question

You are considering a project that has been assigned a discount rate of 7 percent. If...

You are considering a project that has been assigned a discount rate of 7 percent. If you start the project today, you will incur an initial cost of $8,000 and will receive cash inflows of $4,550 a year for two years. If you wait one year to start the project, the initial cost will rise to $9,000 and the cash flows will increase to $5,200 a year for two years. What is the value of the option to wait?

Group of answer choices -$331.40 -$194.46 $148.93 $175.21 None of above is correct.

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Footstar Company is considering a project that has been assigned a discount rate of 12 percent....
Footstar Company is considering a project that has been assigned a discount rate of 12 percent. If the company starts the project today, it will incur an initial cost of $565,000 and will receive cash inflows of $210,000 a year for five years. If the company waits one year to start the project, the initial cost will rise to $630,000 and the cash flows will increase to $240,000 a year for five years. What is the value of the option...
You are considering a project that has been assigned a discount rate of 10 percent. If...
You are considering a project that has been assigned a discount rate of 10 percent. If you start the project today, you will incur an initial cost of $1,000 (at t=0) and will receive cash inflows of $500 a year for four years (starting from year t=1). If you wait one year to start the project, the initial cost will rise to $1,300 (at t=1) and the cash flows will increase to $600 a year for four years (starting from...
You are considering a project with a discount rate of 10%. If you start the project...
You are considering a project with a discount rate of 10%. If you start the project today, you will incur an initial cost of $500 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 $515 and the cash flows will increase to $365 a year for three years. What is the value of the option to wait (the difference in NPV today...
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...
A company is considering a project with an initial cost today of $20,000. The project has...
A company is considering a project with an initial cost today of $20,000. The project has a 3-year life with cash inflows of $5,500 a year. Should the company decide to wait one year to commence this project, the initial cost will increase by 5 %, and the cash inflows will increase by 6 % a year. Should the company decide to wait two years to commence this project, the initial cost will increase by 6 %, and the cash...
You are considering two mutually exclusive projects that have been assigned the same discount rate of...
You are considering two mutually exclusive projects that have been assigned the same discount rate of 10.5 percent. Project A has an initial cost of $54,500, and should produce cash inflows of $16,400, $28,900, and $31,700 for Years 1 to 3, respectively. Project B has an initial cost of $79,400, and should produce cash inflows of $0, $48,300, and $42,100, for Years 1 to 3, respectively. What is the incremental IRR? 7.83% 5.40% −15.40% -4.67% 13.89%
(1)Wilson's Antiques is considering a project with an initial cost today of $10,000. The project has...
(1)Wilson's Antiques is considering a project with an initial cost today of $10,000. The project has a life of 2 years with cash inflows of $6,500 a year. Should the firm decide to wait one year to commence this project, the initial cost will increase by 5 percent, and the cash inflows will increase to $7,500 a year. What is the value of the option to wait at a discount rate of 10 percent? Please explain your answer. (2)Discuss some...
Lowell Flooring has assigned a discount rate of 15.2 percent to a new project that has...
Lowell Flooring has assigned a discount rate of 15.2 percent to a new project that has an initial cost of $285,400 and cash flows of $87,400, $98,300, and $131,700 for Years 1 to 3, respectively. What is the IRR of this project?
ALiBaba industries is considering to start new project! The Project either start today or exactly in...
ALiBaba industries is considering to start new project! The Project either start today or exactly in two years. The project will cost £10.8 million to start today. The cost of starting project in two years is £12 million. You expect the project to generate £1,250,000 in free cash flow per year forever. The risk free rate is 4.5%. The expected return on the market is 9%, and beta for projects of similar risk is 1.5. The variance of the project's...
An investment project has annual cash inflows of $5,400, $6,000, $7,300, and $8,600, and a discount...
An investment project has annual cash inflows of $5,400, $6,000, $7,300, and $8,600, and a discount rate of 10 percent. What is the discounted payback period for these cash flows if the initial cost is $9,000? options: 2.02 years 2.51 years 1.66 years 1.83 years 1.95 years A project that provides annual cash flows of $16,000 for 9 years costs $85,824 today. Assuming a discount rate of 13%, What is the NPV of this project? options: -3,850.33 1,872.49 2,825.92 4,291.68)...