Question
A project costs $2000 and has a future cash flow of $400 per year forever. If we wait for two years, the project will cost
A project costs $2000 and has a future cash flow of $400 per year forever. If we wait for two years, the project will cost $2500 because of inflation, but the cash flows will be $480 per year forever. If these are the only two options, and the relevant discount rate is 12 percent, which of the following statements is(are) correct? I. we should take on the project today and get $138 more II. we should wait and get $6 more III. the timing option of this project is $167 IV. the timing option of this project is -$138 V. the timing option of this project is zero A. I and IV only B. II and III only C. I and V only D. II and V only E. None of the above
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