1. **State the problem:** Company F must decide whether to invest now or delay investment by 1 year. We compare the Net Present Value (NPV) of investing now versus investing after 1 year. 2. **Formula for NPV:** $$\text{NPV} = \sum \frac{\text{Cash Flow}_t}{(1 + r)^t} - \text{Initial Outlay}$$ where $r$ is the discount rate and $t$ is the year. 3. **Calculate NPV if investing now:** - Initial outlay = 100,000 (at Year 0) - Cash flows: 60,000 at Year 1, 80,000 at Year 2 - Discount rate $r = 0.10$ $$\text{NPV}_{now} = -100,000 + \frac{60,000}{(1+0.10)^1} + \frac{80,000}{(1+0.10)^2}$$ Calculate each term: $$\frac{60,000}{1.10} = 54,545.45$$ $$\frac{80,000}{1.10^2} = \frac{80,000}{1.21} = 66,115.70$$ Sum: $$\text{NPV}_{now} = -100,000 + 54,545.45 + 66,115.70 = 20,661.15$$ 4. **Calculate NPV if investing after 1 year:** - Delay investment by 1 year, so initial outlay of 100,000 occurs at Year 1 - Cash flows: 70,000 at Year 2, 90,000 at Year 3 - Discount rate $r = 0.10$ First, find the present value at Year 1: $$\text{NPV}_{delay, Year 1} = -100,000 + \frac{70,000}{(1+0.10)^1} + \frac{90,000}{(1+0.10)^2}$$ Calculate each term: $$\frac{70,000}{1.10} = 63,636.36$$ $$\frac{90,000}{1.21} = 74,380.17$$ Sum at Year 1: $$-100,000 + 63,636.36 + 74,380.17 = 38,016.53$$ Now discount this back to Year 0: $$\text{NPV}_{delay} = \frac{38,016.53}{1.10} = 34,560.48$$ 5. **Decision:** Compare NPVs: $$\text{NPV}_{now} = 20,661.15$$ $$\text{NPV}_{delay} = 34,560.48$$ Since $\text{NPV}_{delay} > \text{NPV}_{now}$, Company F should delay investment by 1 year. **Final answer:** Delay investment by 1 year for a higher NPV of approximately 34,560.48.