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