An option the firm has is to wait a year and see if the other firm decides
Fantastic news! We've Found the answer you've been seeking!
Question:
An option the firm has is to wait a year and see if the other firm decides to enter the market. Using the same cash flow assumptions ($50,000 CF with no competitor and $30,000 CF with a competitor in six years) evaluate the NPV, given this option. Note, if you wait, you will know prior to your initial cost if the competitor will or will not enter the market. The interest rate is 9%. Evaluate the NPV given the option to delay and compute the value of the delay option.
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date: