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Excel Online Structured Activity: Investment Timing Option All American Telephones Inc. is considering the production of a new cell phone. The project will require an investment of $16 million. If the phone is well received, the project will produce cash flows of $9 million a year for 3 years, but if the market does not like the product, the cash flows will be only $1 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the project's investment or its cash flows-only their timing. Because of the anticipated shifts in technology, the 1 -year delay means that cash flows will continue only 2 years after the initial investment is made. All American's WACC is 8%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet What action do you recommend? Do not round intermediate calculations. Round your answers to the nearest dollar. Use a minus sign to enter negative values, if any. NPV without waiting: $ NPV of waiting 1 year: $ You recommend 1 Investment Timing Option WACC 5 Project Dane Todiy: \begin{tabular}{llr} 6. Investment cost & \\ 7 & CFi if product well received & $16,000,000 \\ at & CFs if product poorly recelved & $9,000,000 \\ 9 & Probability of good market conditions & $1,000,000 \\ 10 & Probability of bad market conditions & 50.00% \\ 11 & Project life (in years) & 50,00% \\ \hline \end{tabular} 11 Projectife (in years) 12 Wai 1 Yoar To Do Project: 14 Inwestment cost 21 NPV of Dolng Project Today 23 Good Marker Concitions: 24 Probability 25 invostment cost 26 Cash inflows \begin{tabular}{l|l} 27 \\ 28 & Net present value, good market \\ 20 & \end{tabular} \begin{tabular}{rrrr} 0 & 1 & 2 & 3 \\ \hline 50,00% & & \\ \hline$16,000,000 & $9,000,000 & $9,000,000 & $9,000,000 \\ \hline & Formulas & & \\ \hline & & & \end{tabular} 30 Baor Market Conditions: 31 Probability 32. Investment cost 33. Cash inflows 34. 35 Net present value, bad market 36 37. Expected NPV of doing project foday NPV of Waiting 1 Year to Do Project 40 41 Good Market Conditions. 42. Probability 43 investment cost 44 Cash infiows 45 Net present value, good market 47 1 1 WN/A 48 Bad Marker Condtions: 49 Probability 50 Investment cost 50.00% 51 Cash inflows .$16,000,000 52 $1,000,000$1,000,000 53 Net present value, bad market 54 12. HN/AN 55 Expected NPV today of waiting 1 year 56 What action is recommended? Excel Online Structured Activity: Investment Timing Option All American Telephones Inc. is considering the production of a new cell phone. The project will require an investment of $16 million. If the phone is well received, the project will produce cash flows of $9 million a year for 3 years, but if the market does not like the product, the cash flows will be only $1 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the project's investment or its cash flows-only their timing. Because of the anticipated shifts in technology, the 1 -year delay means that cash flows will continue only 2 years after the initial investment is made. All American's WACC is 8%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet What action do you recommend? Do not round intermediate calculations. Round your answers to the nearest dollar. Use a minus sign to enter negative values, if VPV without waiting: \$ UPV of waiting 1 year: $ ou recommend Excel Online Structured Activity: Investment Timing Option All American Telephones Inc. is considering the production of a new cell phone. The project will require an investment of $16 million. If the phone is well received, the project will produce cash flows of $9 million a year for 3 years, but if the market does not like the product, the cash flows will be only $1 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the project's investment or its cash flows-only their timing. Because of the anticipated shifts in technology, the 1 -year delay means that cash flows will continue only 2 years after the initial investment is made. All American's WACC is 8%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet What action do you recommend? Do not round intermediate calculations. Round your answers to the nearest dollar. Use a minus sign to enter negative values, if any. NPV without waiting: $ NPV of waiting 1 year: $ You recommend 1 Investment Timing Option WACC 5 Project Dane Todiy: \begin{tabular}{llr} 6. Investment cost & \\ 7 & CFi if product well received & $16,000,000 \\ at & CFs if product poorly recelved & $9,000,000 \\ 9 & Probability of good market conditions & $1,000,000 \\ 10 & Probability of bad market conditions & 50.00% \\ 11 & Project life (in years) & 50,00% \\ \hline \end{tabular} 11 Projectife (in years) 12 Wai 1 Yoar To Do Project: 14 Inwestment cost 21 NPV of Dolng Project Today 23 Good Marker Concitions: 24 Probability 25 invostment cost 26 Cash inflows \begin{tabular}{l|l} 27 \\ 28 & Net present value, good market \\ 20 & \end{tabular} \begin{tabular}{rrrr} 0 & 1 & 2 & 3 \\ \hline 50,00% & & \\ \hline$16,000,000 & $9,000,000 & $9,000,000 & $9,000,000 \\ \hline & Formulas & & \\ \hline & & & \end{tabular} 30 Baor Market Conditions: 31 Probability 32. Investment cost 33. Cash inflows 34. 35 Net present value, bad market 36 37. Expected NPV of doing project foday NPV of Waiting 1 Year to Do Project 40 41 Good Market Conditions. 42. Probability 43 investment cost 44 Cash infiows 45 Net present value, good market 47 1 1 WN/A 48 Bad Marker Condtions: 49 Probability 50 Investment cost 50.00% 51 Cash inflows .$16,000,000 52 $1,000,000$1,000,000 53 Net present value, bad market 54 12. HN/AN 55 Expected NPV today of waiting 1 year 56 What action is recommended? Excel Online Structured Activity: Investment Timing Option All American Telephones Inc. is considering the production of a new cell phone. The project will require an investment of $16 million. If the phone is well received, the project will produce cash flows of $9 million a year for 3 years, but if the market does not like the product, the cash flows will be only $1 million per year. There is a 50% probability of both good and bad market conditions. All American can delay the project a year while it conducts a test to determine whether demand will be strong or weak. The delay will not affect the dollar amounts involved for the project's investment or its cash flows-only their timing. Because of the anticipated shifts in technology, the 1 -year delay means that cash flows will continue only 2 years after the initial investment is made. All American's WACC is 8%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet What action do you recommend? Do not round intermediate calculations. Round your answers to the nearest dollar. Use a minus sign to enter negative values, if VPV without waiting: \$ UPV of waiting 1 year: $ ou recommend

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