1. A company is considering spending $202,000 at Time 0 to test a new product. Depending on the test results, the company may decide to spend $1,786,000 at Time 1 to start production of the product. If the product is introduced and it is successful, it will produce aftertax cash flows of $667,000 a year for Years 2 through 6. The probability of successful test and investment is 60 percent. What is the net present value at Time 0 given a 10.90% discount rate?

		$168,808.19
		$172,549.19
		$176,290.19
		$180,031.19
		$183,772.19

2. A company is considering launching a new product. They estimate that if the company launches the product this year it will have an NPV of $13.5 million. The company has the option to wait one year to launch the product, however, the demand next year will depend upon what new products the company's competitors introduce and therefore greater uncertainty about next year's demand. Launching the new product today will involve a total capital expenditure of $50 million. If the risk-free rate is 2.10%, N(d1) is .62 and N(d2) is .65, then what is the value, in $ million, of the option to wait until next year to launch the new product? (Hint: current asset value (S) equals the sum of capex and NPV)

		$7.18
		$7.27
		$7.36
		$7.45
		$7.54