1. In 1991 Coastal Corporation, a major U.S.-based oil company, was approached by representatives of the National Iranian Oil Company with an offer to sell Coastal 2.5 million barrels of oil below market price at $10 per barrel provided that Coastal obtain Treasury Department approval to sell the oil in the United States. Iranian oil had been barred from the U.S. since 1987. Iran, sensing a thaw in relations between the two countries, was eager to reestablish itself as a supplier of oil to the United States. Coastal had maintained relations with Iran throughout the ban and had continued to buy Iranian oil for non-U.S. markets. Coastal felt that if they were successful in getting the import license, they would be able to sell the oil in the U.S. markets for $16 per barrel (net of transportation costs). The license application process takes about a month and its outcome is uncertain- the license could either be approved or denied. Coastal management judged the two possibilities equally likely. In order to apply for the license, Coastal first had to contract with the National Iranian Oil Company for the 2.5 million barrels of oil. If the license were denied, Coastal would not get any oil and would have to pay a $2 a barrel penalty as per the contract. Should Coastal sign the contract?