Business, 21.07.2021 19:00 lyn94

Your firm is considering a project with a discount rate of 9%. If you start the projecttoday, your firm will incur an initial cost of $490 and will receive cash inflows of$365 per year for 3 years. If you instead wait one year to start the project, the initial cost will rise to $530 and the cash flows will increase to $405 a year for the following 3 years. Would your firm be better off starting the project now or waiting to start the project in a year? Explain clearly including an estimate of the value of the option to wait.

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Answer from: Jacobolobo7

If the company start the project today then NPV of the project,

Year Cash Flow PV of Cash flow

0 -490 -490

1 365 365/1.09= 334.86

2 365 365/1.09^2 = 307.21

3 365 365/1.09^3= 281.85

NPV = 433.92

NPV of Project0= $ 433.92

If a company start a project after one year,

Year Cash Flow PV of Cash flow

0 0 0

1 -530 -530/1.09= -486.24

2 405 405/1.09^2 =340.88

3 405 405/1.09^3 = 312.73

4 405 405/1.09^4 = 286.91

NPV = 454.28

NPV of Project1= $ 454.28

Here for project start after one year has more Net Present Value of cash flow compared to which start now.

So, Starting a project after one year is more profitable.

Answer from: Quest

answer; i believe that the correct answer is ( secondary research); //

Answer from: Quest

Secured loans are protected by collateral security. examples: title loans where the borrower uses the car title as collateral security interest rates are lower and repayments are longer therefore risk is low as a collateral security is given as guarantee to the bank in case of failure to pay the loanunsecured loans are not protected by collateral security but it is given on the creditworthiness of the borrower, trusting that she/he will pay on time. examples; payday loans is a short term loan where the borrower lends money from the bank and pays is back when the borrower receives his/her wages.interest rates are high and repayments are shorter. but the risk is high as no collateral security is given as a guarantee to the bank for payment of the loan

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Your firm is considering a project with a discount rate of 9%. If you start the projecttoday, your f...

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