Bonus Questions

Due to the recent collision of The Citadel with a Galactic Federation prison, The Citadel is currently experiencing a severe fiscal crisis and the ruling council has threatened to nationalize foreign owned assets. You now estimate that there is a $25\%$ chance in any given year that your project assets will be expropriated without compensation. The cost of capital of $17\mathrm{.}0\%$ p$.$a$.$ used in the previous question does not factor in any such risk of expropriation.

Q: What is the NPV of your project now? Would you accept the project?

Due to the recent collision of The Citadel with a Galactic Federation prison, The Citadel is currently experiencing a severe fiscal crisis and the ruling council has threatened to nationalize foreign owned assets. You now estimate that there is a $25\%$ chance in any given year that your project assets will be expropriated without compensation. The cost of capital of $17\mathrm{.}0\%$ p$.$a$.$ used in the previous question does not factor in any such risk of expropriation.

Q: What is the NPV of your project now? Would you accept the project?