Consider the problem of investing in a risky project. A project costs $250. The risk free rate is 8%. The company WACC is 25%. The analyst has done the calculations and has produced the binomial tree (including the probability of an up move) showing the cash flows from the project at future dates. Once you invest the cash flow starts growing at 4% annually. p 0.4 90 65 60 60 40 25 Time (Yrs) 0 1 2 Suppose you have the option to wait and decide whether to accept the project. You can invest now or next year or in two years. At the end of 2 years you either invest in the project or lose it since further deferral is not possible. What is the NPV?

D Question 2 5 pts Consider the problem of investing in a risky project. A project costs $250. The risk free rate is 8%. The company WACC is 25%. The analyst has done the calculations and has produced the binomial tree (including the probability of an up move) showing the cash flows from the project at future dates. Once you invest the cash flow starts growing at 4% annually. 0.4 90 65 60 60 40 25 Time (Yrs) 0 1 Suppose you have the option to wait and decide whether to accept the project. You can invest now or next year or in two years. At the end of 2 years you either invest in the project or lose it since further deferral is not possible. What is the NPV? O 30 201 O 40 00 O 35.714 D Question 2 5 pts Consider the problem of investing in a risky project. A project costs $250. The risk free rate is 8%. The company WACC is 25%. The analyst has done the calculations and has produced the binomial tree (including the probability of an up move) showing the cash flows from the project at future dates. Once you invest the cash flow starts growing at 4% annually. 0.4 90 65 60 60 40 25 Time (Yrs) 0 1 Suppose you have the option to wait and decide whether to accept the project. You can invest now or next year or in two years. At the end of 2 years you either invest in the project or lose it since further deferral is not possible. What is the NPV? O 30 201 O 40 00 O 35.714