It is the beginning of September and you have been offered the following deal to go? heli-skiing. If you pick the first week in January and pay for your vacation? now, you can get a week of? heli-skiing for $3,500.
?However, if you cannot ski because the helicopters cannot fly due to bad? weather, there is no? snow, or you get? sick, you do not get a refund. There is a 35% probability that you will not be able to ski. If you wait until the last minute and go only if you know that the conditions are perfect and you are? well, the vacation will cost you $5,000.
You estimate that the pleasure you get from? heli-skiing is worth $7,900 per week to you? (if you had to pay more than? that, you would choose not to? go). If your cost of capital is 16% per? year, should you book ahead or? wait?
You should (wait or book ahead) because the NPV of this choice is ?