Mall Toys Co. is considering a three-year project that will require an initial investment of $43,500....

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Mall Toys Co. is considering a three-year project that willrequire an initial investment of $43,500. If market demand isstrong, Mall Toys Co. thinks that the project will generate cashflows of $28,500 per year. However, if market demand is weak, thecompany believes that the project will generate cash flows of only$1,500 per year. The company thinks that there is a 50% chance thatdemand will be strong and a 50% chance that demand will be weak. Ifthe company uses a project cost of capital of 10%, what will be theexpected net present value (NPV) of this project? -$5,267 -$6,50-$6,197 -$5,887 Mall Toys Co. has the option to delay starting thisproject for one year so that analysts can gather more informationabout whether demand will be strong or weak. If the company choosesto delay the project, it will have to give up a year of cash flows,because the project will then be only a two-year project. However,the company will know for certain if the market demand will bestrong or weak before deciding to invest in it. What will be theexpected NPV if Mall Toys Co. delays starting the project? $27,375$5,421 $2,304 $2,710 What is the value of Mall Toys Co.’s option todelay the start of the project?

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Mall Toys Co. is considering a three-year project that willrequire an initial investment of $43,500. If market demand isstrong, Mall Toys Co. thinks that the project will generate cashflows of $28,500 per year. However, if market demand is weak, thecompany believes that the project will generate cash flows of only$1,500 per year. The company thinks that there is a 50% chance thatdemand will be strong and a 50% chance that demand will be weak. Ifthe company uses a project cost of capital of 10%, what will be theexpected net present value (NPV) of this project? -$5,267 -$6,50-$6,197 -$5,887 Mall Toys Co. has the option to delay starting thisproject for one year so that analysts can gather more informationabout whether demand will be strong or weak. If the company choosesto delay the project, it will have to give up a year of cash flows,because the project will then be only a two-year project. However,the company will know for certain if the market demand will bestrong or weak before deciding to invest in it. What will be theexpected NPV if Mall Toys Co. delays starting the project? $27,375$5,421 $2,304 $2,710 What is the value of Mall Toys Co.’s option todelay the start of the project?