Consider again the project in Problem 17.2, only suppose that the widget price is unchanging and the cost of investment is declining at 2% per year. When will you invest? What is the value today of the project?
In problem 17.2
You have a project costing $1.50 that will produce two widgets, one each the first and second years after project completion. Widgets today cost $0.80 each, with the price growing at 2% per year. The effective annual interest rate is 5%.