1. The NPV for a project is €75,000. The ‘‘wait-and-see option’’ for the project is worth €100,000. (a) Should the project proceed immediately? (b) What is the minimum required NPV to justify...

1. The NPV for a project is €75,000. The ‘‘wait-and-see option’’ for the project is worth €100,000. (a) Should the project proceed immediately? (b) What is the minimum required NPV to justify immediate investment?

2. The bank proposes to lend the company €600,000 toward the €1.2 million required to invest in the project in Problem 1. The rate of interest would be 8%. The loan is repayable in three equal annual instalments, the first paid at the end of the first year. Use the APV method to calculate the PV of the tax benefit of the loan if the company continues to pay taxes during the next four years.