Question: XYZ is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a

XYZ is considering a project that has an initial cost today of $10,000. The project has a two-year life with cash inflows of $6,500 a year. Should XYZ decide to wait one year to commence this project, the initial cost will increase by 5 percent and the cash inflows will increase to $7,500 a year. What is the value of the option to wait if the applicable discount rate is 10 percent?

	a.	$1,235.54
	b.	$1,735.54
	c.	$1,006.76
	d.	$1,606.76
	e.	$1,509.28

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