1. You are considering a project that has been assigned a discount rate of 12 percent. If you start the project today, you will incur an initial cost of $280 and will receive cash inflows of $350 a year for 3 years. If you wait 1 year to start the project, the initial cost will rise to $420 and the cash flows will increase to $385 a year for 3 years. What is the value of the option to wait?
O –$20.20
O –$110.01
O –$55.93
O $18.67
O $20.20
2. Which one of these occurs at the financial breakeven point?
O Net present value equals zero
O Fixed costs equal variable costs
O EBIT equals zero
O IRR equals zero
O Net income equals zero