You are evaluating a project that will provide its first cash flow of $80,000 in one year. The cash flow is expected to grow by 3% annually for the foreseeable future. Considering its degree of risk, you think a discount rate of 10% is appropriate. The project needs an initial investment of $1,200,000. What would you do?

Select one:

a. Walk away since the project is over-valued by $57,143.

b. The project is priced correctly.

c. Walk away since the project is over-valued by $400,000.

d. Take the project since it is under-valued by $57,143.

e. Take the project since it is under-valued by $400,000.