You are considering a project that has been assigned a discount rate of 8 percent. If you start the project today (t=0), you will incur an initial cost of $1,020 and will receive cash inflows of $450 a year for three years (starting from year 1). If you wait one year to start the project, the initial cost will rise to $1,100 (at t=1) and the cash flows will increase to $490 a year for three years (starting from year t=2). Should you wait one year to start the project? (Hint: calculate and compare the NPV of the project if it is started today vs. started one year from today)

A. No, because NPV0 is lower by $9.54

B. No, because NPV0 is lower by $15.38

C. Yes, because NPV0 is higher by $11.03

D. Yes, because NPV0 is higher by $22.16

E. Yes, because NPV0 is higher by $17.42

Emerson Company has developed a new gadget. If the gadget is successful, the present value of the payoff (at the time the product is brought to market) is $25 million. If the gadget fails, the present value of the payoff is $6 million. If the gadget goes directly to market, there is a 50 percent chance of success. Alternatively, Emerson Company can delay the launch by one year and spend $1.7 million to test-market the gadget. Test-marketing would allow the firm to improve the gadget and increase the probability of success to 75%. The appropriate discount rate is 10%. Should the firm conduct test-marketing?

A. No, because NPV0 is lower by $1.29 million

B. No, because NPV0 is lower by $1.18 million

C. Yes, because NPV0 is higher by $1.36 million

D. Yes, because NPV0 is higher by $1.43 million

E. Yes, because NPV0 is higher by $1.21 million