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Your firm is considering a project that will have an initial cost of $25,000. This project can be accepted today or in one year. If
Your firm is considering a project that will have an initial cost of $25,000. This project can be accepted today or in one year. If accepted today, it will generate cash flows of $17,250 for 3 years. If your firm waits one year to start the project, the initial cost will rise to $27,300 and the cash flows will increase to $18,500 a year for three years. Assuming a discount rate of 14%, what is the value of the option to wait?
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