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A firm is analyzing a 3 - year oil development project, and the project can either start now or wait for a year to start.
A firm is analyzing a year oil development project, and the project can either start now or wait for a year to start. If the project starts now, the future oil demand high average, or low is uncertain, and the expected NPV is $ million. If the project waits for a year, the oil demand will become certain; and if the demand is low, the project will not start at all and the firm will avoid losing money. Such a delay option has a value of $ million. What is the final decision on the project?
Group of answer choices
Accept the project because its adjusted NPV is $ million Wait for a year to decide whether to start the project or not.
Reject the project now because its initial NPV without the delay option is $ million.
Reject the project now because the future is uncertain.
Start the project now. Do not wait for a year.
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