Question: I need help please.I am not sure if my responses are all correct. Companies often need to choose between making an investment now or waiting


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. Newtown Propane Co, is considering a three-year project that will require an initial investment of $43,500. If market demand is strong, Newtown Propane Co, thinks that the project will jenerate cash flows of $28,000 per year. However, if market demand is weak, the company believes that the project will generate cash flows of anly $1,500 per year. The company thinks that there is a 50% chance that demand will be strong and a 50% chance that demand will be weak. If the company uses a project cost of capital of 14%, what will be the expected net present value (NPV) of this project? $8,330$9,256$1,868$11,107 58,330 $9,256$7,868$11,107 Newtown Propane Co. has the option to delay starting this project for one year so that analysts can gather more information about whether demand will be strong or weak. If the company chooses to delay the project, it will have to give up a year of cash flows, because the project will then be only a two-vear project. However, the company will know for certain if the market demand will be strong or weak before deciding to invert in it. If the company accepts the project now, it would mean that the company is the option to make a more informed decision, If the value of the option is than the value of the project, then the company is more likely to use the option. The time before expiration for the investment timing option is one year, Considering these qualitative factors, the company What will be the expected NPV if Newtown Propane Co. delays starting the project? (Note: Use the cost of capital to discount all cash flows.) 51,143 $21,506 $972 510,399 Newtown Propane Co. has the option to delay starting this project for one year so that analysts can gather more information about whether demand will be strong or weak. If the company chooses to delay the project, it will have to give up a year of cash flows, because the project will then be only i two-year project. However, the company will know for certain if the market demand will be strong or weak before dechling to invest in it. If the company accepts the project now, it would mean that the company is the option to make a more informed decision, If the value of the option is than the value of the project, then the company is more likely to use the option. The time before expiration for the investment timing option is one yeat. Considaring these qualitative factors, the company What will be the expected NPV if Newtown Propane Co. delays starting the project? (Note: Use the cost of capital to discount all cash flows.) $1,143 $21,506 5972 $10,399 Whe is the value of Newtown Propane Co,s option to delay the start of the project? 51,143 $10,399 4972 $21,506
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