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Suppose Wealthy Construction is considering another snoaller scale project that has an initial cost of RM10,000. The project has a two-year life with cash inflows
Suppose Wealthy Construction is considering another snoaller scale project that has an initial cost of RM10,000. The project has a two-year life with cash inflows of RM6,500 a year. If Wealthy Construction decides to wait one year to commence this project, the initial cost will increase by 5 percent and the cash inflows will increase to RM7,500 a year. i) What is the value of the option to wait if the applicable discount rate is 10 percent? (7 marks)
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