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Suppose a project requires a $10 million initial outlay to produce a guaranteed future cash flow of $12 million one year from today. Assume the
Suppose a project requires a $10 million initial outlay to produce a guaranteed future cash flow of $12 million one year from today. Assume the appropriate discount rate is 10 percent annually today, which will decrease to 8 percent annually next year. Is there value in waiting to execute the project? If the discount rate remains constant, that is, the rate is always 10 percent annually, is there any value in waiting to execute the project?
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