Wilson's Antiques is considering a project with an initial cost today of $10,000. The project has a 2-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 percent, and the cash inflows will increase to $7,500 a year.
What is the value of the option to wait if the applicable discount rate is 10 percent?