You Are Considering a Project That Has Been Assigned a Discount

You are considering a project that has been assigned a discount rate of 14 percent.If you start the project today,you will incur an initial cost of $8,500 and will receive cash inflows of $5,550 a year for two years.If you wait one year to start the project,the initial cost will rise to $9,200 and the cash flows will increase to $5,800 a year for two years.What is the value of the option to wait?

A) -$331.40
B) -$194.46
C) $228.51
D) $230.49
E) $334.68

Correct Answer:

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