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Nvidia is considering a new project at a cost of $300 million. The project may...

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Finance

Nvidia is considering a new project at a cost of $300 million. The project may begin today or in exactly one year. The company expects the project to generate $37,500,000 in free cash flow the first year if they begin the project today. Free cash flow is expected to grow at a rate of 3% per year. Assume The risk-free rate is 4%. The appropriate cost of capital for this investment is 11%. The standard deviation of the projects value is 30%. Should Nvidia begin the project today or wait one year? i.e. value the option to delay and compare the current value of the project to the value of waiting.

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