You are the manager at Founders Inc. You are deciding on a project that can be...
You are the manager at Founders Inc. You are deciding on a project that can be accepted today or a year from now. If you start the project today it will cost, you $720 and the cash inflows of $525 a year for three years. If the start is delayed one year, the initial cost will rise to $832 and the cash flows will increase to $616 a year for three years.
What is the value of the option to wait if the discount rate is 12 percent?
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You are the manager at Founders Inc. You are deciding on a
project that can be...
You are considering a project that can be started this year or could be delayed a...
You are considering a project that can be started this year or could be delayed a year. If the project starts immediately, it will have an initial cost of $9,600 and cash inflows of $7,000 a year for three years. If the start is delayed one year, the initial cost will rise to $10,400 and the cash flows will increase to $7,700 a year for three years. What is the value of the option to wait if the discount rate...
You are considering a project that has been assigned a discount rate of 14.3 percent. If...
You are considering a project that has been assigned a discount rate of 14.3 percent. If you start the project today, you will incur an initial cost of $11,400 and will receive cash inflows of $6,800 a year for two years. If you wait one year to start the project, the initial cost will rise to $12,100 and the cash flows will increase to $7.200 a year for two years. What is the value of the option to wait?
Finance - Option to wait
You are considering a project which has been assigned a discount rate of 8%. If you start the project today, you will incur an initial cost of $480 and will receivecash inflows of $350 a year for three 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 ayear for three years. What is the value of the option to wait? (5 points)
2. Investment timing options Companies often need to choose between making an investment now or waiting till the company can gather more relevant information about the potential project. This opportu...
2. Investment timing options Companies often need to choose between making an investment now or waiting till the company can gather more relevant information about the potential project. This opportunity to wait before making the decision is called the investment timing option. Consider the case: General Forge and Foundry Co. is considering a three-year project that will require an initial investment of $41,000 If market demand is strong, General Forge and Foundry Co. thinks that the project will generate cash...
Wet for the Summer, Inc., manufactures filters for swimming pools. The company is deciding whether to...
Wet for the Summer, Inc., manufactures filters for swimming pools. The company is deciding whether to implement a new technology in its pool filters. One year from now the company will know whether the new technology is accepted in the market. If the demand for the new filters is high, the present value of the cash flows in one year will be $14.3 million. Conversely, if the demand is low, the value of the cash flows in one year will...
Investment Timing Option: Decision-Tree Analysis The Karns Oil Company is deciding whether to drill for oil...
Investment Timing Option: Decision-Tree Analysis The Karns Oil Company is deciding whether to drill for oil on a tract of land that the company owns. The company estimates the project would cost $11 million today. Karns estimates that, once drilled, the oil will generate positive net cash flows of $5.39 million a year at the end of each of the next 4 years. Although the company is fairly confident about its cash flow forecast, in 2 years it will have...
(11) An investment project provides cash inflows of $765 per year for eight years. What is...
(11) An investment project provides cash inflows of $765 per year for eight years. What is the project payback period if the initial cost is $2,400? What if the initial cost is $3,600? What if it is $6,500? (12) An investment project has annual cash inflows of $4,200, $5,300, $6,100, and $7,400, and a discount rate of 14%. What is the discounted payback period for these cash flows if the initial cost is $7,000? What if the initial cost is...
a you You are performing a project that provided expected cash flows of "8,000 in the...
a you You are performing a project that provided expected cash flows of "8,000 in the first year $6,200 in the second year, $5,000 in the third year. If the discount rate is 15% how much those cash flows worth today? Assuming annual compounding. $129, 720 $ 114,836 119,195 $ 131, 820 $ 14,9320
Real Options: Quantitative problems Quantitative Problem 1 Florida Seaside Oil Exploration Company is deciding whether...
Real Options: Quantitative problems Quantitative Problem 1 Florida Seaside Oil Exploration Company is deciding whether to drill for oil off the northeast coast of Florida. The company estimates that the project would cost $4.21 million today. The firm estimates that once drilled, the oil will generate positive cash flows of $2.105 million a year at the end of each of the next four years. While the company is fairly confident about its cash flow forecast, it recognizes that if it...
A project costs $91,000 today and is expected to generate cash flows of $11,000 per year...
A project costs $91,000 today and is expected to generate cash flows of $11,000 per year for the next 20 years. The firm has a cost of capital (discount rate) of 8 percent. Should this project be accepted, and why.
You are considering a project that has been assigned a discount rate of 14.3 percent. If you start the project today, you will incur an initial cost of $11,400 and will receive cash inflows of $6,800 a year for two years. If you wait one year to start the project, the initial cost will rise to $12,100 and the cash flows will increase to $7.200 a year for two years. What is the value of the option to wait?
2. Investment timing options Companies often need to choose between making an investment now or waiting till the company can gather more relevant information about the potential project. This opportunity to wait before making the decision is called the investment timing option. Consider the case: General Forge and Foundry Co. is considering a three-year project that will require an initial investment of $41,000 If market demand is strong, General Forge and Foundry Co. thinks that the project will generate cash...
Investment Timing Option: Decision-Tree Analysis The Karns Oil Company is deciding whether to drill for oil on a tract of land that the company owns. The company estimates the project would cost $11 million today. Karns estimates that, once drilled, the oil will generate positive net cash flows of $5.39 million a year at the end of each of the next 4 years. Although the company is fairly confident about its cash flow forecast, in 2 years it will have...
a you You are performing a project that provided expected cash flows of "8,000 in the first year $6,200 in the second year, $5,000 in the third year. If the discount rate is 15% how much those cash flows worth today? Assuming annual compounding. $129, 720 $ 114,836 119,195 $ 131, 820 $ 14,9320
Real Options: Quantitative problems Quantitative Problem 1 Florida Seaside Oil Exploration Company is deciding whether to drill for oil off the northeast coast of Florida. The company estimates that the project would cost $4.21 million today. The firm estimates that once drilled, the oil will generate positive cash flows of $2.105 million a year at the end of each of the next four years. While the company is fairly confident about its cash flow forecast, it recognizes that if it...
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