Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should Wilson's decide to wait one year to commence this project, the initial cost will increase by 5% and the cash inflows will increase to $7,500 a year. What is the value of the option to wait if the applicable discount rate is 10%?© BrainMass Inc. brainmass.com October 10, 2019, 7:57 am ad1c9bdddf
Option 1: Start now
Cash inflow in year 1=C1=$6500
Cash inflow in year 2=C2=$6500
NPV of ...
Solution depicts the steps to calculate the value of option to wait.