Investment timing options Companies often need to choose between making an investment now or waiting till the company can gather more relevant information about the potential project. This opportunity to wait before making the decision is called the investment timing option. Consider the case: Industrialization Enterprise is considering a three-year project that will require an initial investment of dollar40,000. If market demand is strong, Industrialization Enterprise thinks that the project will generate cash flows of dollar28,000 per year. However, if market demand is weak, the company believes that the project will generate cash flows of only dollar2,000 per year. The company thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak. If the company uses a project cost of capital of 11%, what will be the expected net present value (NPV) of this project ? -dollar3,345 -dollar3,011 -dollar2,843 -dollar3,680 Industrialization Enterprise has the option to delay starting this project for one year so that analysts can gather more information about whether demand will be strong or weak. If the company chooses to delay the project, it will have to give up a year of cash flows, because the project will then be only a two-year project. However, the company will know for certain if the market demand will be strong or weak before deciding to invest in it. What will be the expected NPV if Industrialization Enterprise delays starting the project? dollar28,424 dollar3,582 dollar3,045 dollar7,163 What is the value of Industrialization Enterprise's option to delay the start of the project? dollar7,163 dollar3,582 dollar6,927 dollar3,045 dollar28,424