An analyst knows with certainty that Skipper Inc. will exist for two years and have the following cash flows per share.

	Year 1 ($)	Year 2 ($)
Revenue	100	100
Costs	80	80
Net cash flow	20	20

The problem is that Skipper Inc.s costs may not be $80 per share with certainty. Instead, each year there is a 10% chance that a worker will be seriously injured and that Skipper will have to pay the employees medical expenses and lost wages. In an injury does occur, Skippers costs equal $85 per share. If an injury does not occur (that has a probability of 0.9), then Skippers costs equal $79.445 per share.

A. What is Skippers expected net cash flow each year?

B. If the opportunity cost of capital is 8%, what is the stock price?

C. Provide an argument for why the opportunity cost of capital should not change because of the risk of worker injury.