You company is considering purchasing 10 machines, each of which has the following expected cash flows:

Year	0	1	2	3	4
CF of 1 machine	-550	100	200	300	400

You estimate the appropriate discount rate for the machines is 25%.

(a) Would you recommend buying just one machine if there are no options effects? (b) Your purchase manager recommends buying one machine today & then, after seeing how the machine operates, reconsidering the purchase of the other 9 machines in 6 months. Assuming that the cash flows from the machines have a standard deviation of 30% and that the risk-free rate is 10%, value this strategy.