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7. You are considering a project in Bolivia that would generate 3 million dollars in cash flows per year going forever. The cost of the

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7. You are considering a project in Bolivia that would generate 3 million dollars in cash flows per year going forever. The cost of the project is 10 million dollars. The discount rate for the project is 15%. You believe that there is some probability of expropriation prior to the 3rd year (after the 2nd cash flow). Which of the following statements is most correct? a. This is a good project if the probability of expropriation is larger than 0.33 b. This is a good project if the probability of expropriation is smaller than 0.33 c. This is a good project if the probability of expropriation is smaller than 0.5 d. This is a good project if the probability of expropriation is smaller than 0.66 0. ) 7. You are considering a project in Honduras that would generate 1.5 million dollars in cash flows per year going forever. The cost of the project is 8 million dollars. The discount rate for the project is 12%. You believe that there is some probability of expropriation prior to the 4th year (after the 3rd cash flow). Which of the following fully describes when this is a good project? a. This is a good project if the probability of expropriation is less than 0.34 b. This is a good project if the probability of expropriation is more than 0.34 c. This is a good project if the probability of expropriation is less than 0.62 d. This is a good project if the probability of expropriation is less than 0.68 e. None of the above

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