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Value of the option to wait-douglass engineering

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Douglass Engineering is considering a project that has an initial cost today of $22,000. The project has a two-year life with cash inflows of $13,500 a year. Should the firm decide to wait one year to commence this project, the initial cost will increase by 4 percent and the cash inflows will increase to $14,200 a year. What is the value of the option to wait if the applicable discount rate is 12 percent?

Reference no: EM132783029

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