Wilsons antiques is considering a project that has an


Wilson's Antiques 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 Wilson's decide to wait one year to commence this project, the initial cost will increase by 5% and there is a 70 percent probability that cash inflows will increase to $7,800 a year and a 30 percent probability that cash inflows will only increase to $6,800 a year. What is the value of the option to wait if the applicable discount rate is 10%?

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