It is the beginning of September and you have been offered the following deal to go heli-skiing. If you pick the first week in January and pay for your vacation now can get a week of heli-skiing for $1,500. However, if you cannot ski because the helicopters cannot fly due to bad weather, there is no snow, or you get sick, you not get a refund. There is a 45% probability that you will not be able to ski. If you wait until the last minute and go only if you know that the conditions are perfect a you are well, the vacation will cost you $4,800. You estimate that the pleasure you get from heli-skiing is worth $7,100 per week to you (if you had to pay more tha that, you would choose not to go). If your cost of capital is 13% per year, should you book ahead or wait? You should because the NPV of this choice is $ (Round to two decimal places)
It is the beginning of September and you have been offered the following deal to go heli-skiing. If you pick the first week in January and pay for your vacation now can get a week of heli-skiing for $1,500. However, if you cannot ski because the helicopters cannot fly due to bad weather, there is no snow, or you get sick, you not get a refund. There is a 45% probability that you will not be able to ski. If you wait until the last minute and go only if you know that the conditions are perfect a you are well, the vacation will cost you $4,800. You estimate that the pleasure you get from heli-skiing is worth $7,100 per week to you (if you had to pay more tha that, you would choose not to go). If your cost of capital is 13% per year, should you book ahead or wait? You should because the NPV of this choice is $ (Round to two decimal places)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:It is the beginning of September and you have been offered the following deal to go heli-skiing. If you pick the first week in January and pay for your vacation now, you
can get a week of heli-skiing for $1,500. However, if you cannot ski because the helicopters cannot fly due to bad weather, there is no snow, or you get sick, you do
not get a refund. There is a 45% probability that you will not be able to ski. If you wait until the last minute and go only if you know that the conditions are perfect and
you are well, the vacation will cost you $4,800. You estimate that the pleasure you get from heli-skiing is worth $7,100 per week to you (if you had to pay more than
that, you would choose not to go). If your cost of capital is 13% per year, should you book ahead or wait?
You should
because the NPV of this choice is $
(Round to two decimal places.)
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