Johnson and Johnson forecasts year-end USD15.840 million free cash flows into perpetuity from an investment of USD73.4 million in Australia. If the required return on this investment is 17.95% and the companys weighted average cost of capital is 15.79%, what must the probability of expropriation in year 7 have to be at a minimum before the investment is not financially viable? If expropriation occurs, it will occur just before the year 7 cash inflow or not at all. Johnson and Johnson has not applied for political risk insurance.

a.

45.298%

b.

64.666%

c.

74.876%

d.

53.429%