Answer Happy

You can invest in a project either now or next year If it is successful, you get a perpetual cash flow of $30M that starts the following year, and grows at rate of 2 percent If it is unsuccessful, you get a perpetual cash flow of $10M that starts the following year and grows at a rate of 2 percent. The project costs $160M and has a discount rate of 12 percent Both states are equally likely If you wait a year, you will know whether the project will be successful (the chance of success is still 50 percent) What is the value of the option to wait? O $100 M O $41.54 M $22.5M