One year to commence this project

Assignment Help Finance Basics
Reference no: EM131332263

Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should Wilson's decide to wait one year to commence this project, the initial cost will increase by 5% and there is a 70 percent probability that cash inflows will increase to $7,800 a year and a 30 percent probability that cash inflows will only increase to $6,800 a year. What is the value of the option to wait if the applicable discount rate is 10%?

Reference no: EM131332263

Questions Cloud

Find the future value of the ordinary annuities : Find the future value of the following ordinary annuities. Payments are made and interest is compounded as given . R=$8000, 6% interest compounded annually for 20 years.
What is the number of subgames in a game : What is the number of subgames in a game whose game tree has eight vertices and one information set, which contains two vertices?
What is the present value : Find the present value of an ordinary annuity with deposits of $8680 quarterly for 5 years at 8.4% compounded quarterly. What is the present value?
Increase in interest rates for the bond : Compute the duration and expected price change for a 1/2% increase in interest rates for the following bond: The par value of the bond is $1,000. The bond has 4 years to maturity with a 7 percent annual coupon rate. The yield to maturity is 8.53%.
One year to commence this project : Wilson's Antiques is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year.
Find all the equilibria obtained by backward induction : Find all the equilibria obtained by backward induction.- Describe the corresponding strategic-form game.- Check whether there exist additional equilibria.
Describe your program objectives and goals : Describe your program objectives and goals, the need, target audience, address the health problem, and any intervention strategies
Calculate present value of firm tax saving due to new debt : Value the present value of a firm’s tax saving due to new debt that they will add for an add on project that will last for three years. The project will add debt today of 75 million and they will reduce debt on a fixed schedule to 50 million in year ..
Big sky must pay for insurance-property taxes : 100% of the purchase price, or it can lease the machinery. Assume that the following facts apply: 1. The machinery falls into the MACRS 3-year class. 2. Under either the lease or purchase, Big Sky must pay for insurance, property taxes, and maintenan..

Reviews

Write a Review

Finance Basics Questions & Answers

  How could we obtain an indisputable discount rate

How could we obtain an indisputable discount rate? How should we calculate the beta and the risk premium?

  How much would the government have to set aside now

The lump sum the government sets aside will also be invested at 6%, annual compounding.

  What is the present value of an annuity consisting of

what is the present value of an annuity consisting of semi-annual payments of an amount m continuing for n years?

  What is the average dividend growth rate

Highway Express has paid annual dividends of $1.05, $1.20, $1.25, $1.15, and $0.95 over the past five years, respectively. What is the average dividend growth rate?

  Determine the amount of his deductible loss

In a separate incident, Jacob had a car accident. The car had originally cost Jacob $25,000. At the time of the accident, the car was worth $50,000. After the accident, the car was worth only $5,000. Because the car was a collector's item, Jacob p..

  Give a syntax-directed definition to determine

The following grammar generates expressions formed by applying an arithmetic operator + to integer and real constants. When Iwo integers are added, the resulting type is integer, otherwise. it is real.

  Determine the overall coefficient

Determine the overall coefficient, Kx; the chlorine molar flux; the interfacial compositions; the percent resistance to mass transfer in the liquid phase.

  How many pounds of salt will there be in the tank

Salt water containing 1.92 lb/gal of salt flows at a fixed rate of 2 gal/min into a 100-gal tank, initially filled with fresh water. The density of the incoming solution is 71.8 lb/ft3. The solution, kept uniform by stirring, flows out at a fixed r..

  What are the primary requirements for a successful jit

what are the primary requirements for a successful jit inventory control

  What need were strips intended to fill

Why do consumers usually prefer fixed-payment loans to simple loans when buying cars and houses?- What is a STRIP? Why were STRIPS created? What need were STRIPS intended to fill?

  How do rising home prices contribute to low mortgage

How do rising home prices contribute to low mortgage delinquencies?

  Conclusion of a syllogism

If the reasoning from premises to a conclusion of a syllogism is accurate then it is considered valid. Can one come to a false conclusion with a valid syllogism?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd