Question: Suppose Wealthy Construction is considering another snoaller scale project that has an initial cost of RM10,000. The project has a two-year life with cash inflows

Suppose Wealthy Construction is considering another snoaller scale project that has

Suppose Wealthy Construction is considering another snoaller scale project that has an initial cost of RM10,000. The project has a two-year life with cash inflows of RM6,500 a year. If Wealthy Construction decides to wait one year to commence this project, the initial cost will increase by 5 percent and the cash inflows will increase to RM7,500 a year. i) What is the value of the option to wait if the applicable discount rate is 10 percent? (7 marks)

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