Digital Inc. is considering production of a new cell phone. The project wou

Digital Inc. is considering production of a new cell

phone. The project would require an investment of $20 million. If the phone

were well received then the project would produce cash flows of $10 million a

year for 3 years but if the market did not like the product the cash flows

would be only $5 million per year. There is a 50 percent probability of both

good and bad market conditions. Digital could delay the project for a year

while it conducted a test to determine if demand would be strong or weak.

The delay would not affect either the project%u2019s cost or its cash flows. Digital%u2019s

WACC is 10 percent. What action would you recommend?