Question
You are considering a project that has been assigned a discount rate of 9 percent. If you start the project today (t=0), you will incur
You are considering a project that has been assigned a discount rate of 9 percent. If you start the project today (t=0), you will incur an initial cost of $1,200 and will receive cash inflows of $510 a year for three years (starting from year 1). If you wait one year to start the project, the initial cost will rise to $1,280 (at t=1) and the cash flows will increase to $550 a year for three years (starting from year t=2). Should you wait one year to start the project? (Hint: calculate and compare the NPV of the project if it is started today vs. started one year from today)
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