Southern Shores Is Considering a Project That Has an Initial

Southern Shores is considering a project that has an initial cost today of $12,500. The project has a two-year life with cash inflows of $7,500 a year. Should the firm opt to wait one year to commence this project, the initial cost will increase by 5 percent and the cash inflows will increase to $8,500 a year. What is the value of the option to wait if the applicable discount rate is 14 percent?

A) $614.52
B) $721.56
C) $914.62
D) $982.67
E) $1,021.66