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You lead a team evaluating a project that offers you alternatives. If you start the project immediately, it will have an initial cost of $30,000

You lead a team evaluating a project that offers you alternatives. If you start the project immediately, it will have an initial cost of $30,000 and generate cash inflows of $7,250 a year for seven years. If you delay the project for one year, the initial cost will be $35,000 and the annual cash flows will be $8,750 for seven years. The project has a discount rate of 12 percent. What is the value of the option to wait?

a. $1,846 (correct)

b. $5,781

c. $529

d. $1,317

correct answer is A $1,846 Please show the entire procedure

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