A company has the opportunity to build a new power project in a foreign country. Net cash flows are $100 m in the first year of operation. Net cash flows in the second year of operation depends upon whether the government sponsors a link to bypass a transmission bottleneck. There is a 50% probability the government will intervene. This is an example of political risk. If the link goes ahead, demand for power from the new plant will be low and net cash flow will be $80 m. If the link does not go ahead, demand for power from the new plant will be high and net cash flow will be $125 m. Similar uncertainty surrounds Year 3 net cash flows. Cash flows beyond Year 3 are perpetual. Should the Company accept the project