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Calculate the value of the option

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You are considering a project that has been assigned a discount rate of 8 percent. If you start the project today, you will incur an initial cost of $480 and will receive cash inflows of $350 a year for 3 years. If you wait one year to start the project, the initial cost will rise to $520 and the cash flows will increase to $385 a year for 3 years. How do you calculate the value of the option to wait and what is that value?

Reference no: EM131055688

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