Mom and Pop Groceries has just dispatched a year's supply of groceries to the government of the Central Antarctic Republic. Payment of $155,000 will be made one year hence after the shipment arrives by snow train. Unfortunately, there is a good chance of a coup d'tat in which case the new government will not pay. Mom and Pop's controller therefore decides to discount the payment at 30%, rather than at the company's 11% cost of capital.

a. Is it proper to use 40% as the discount rate in this situation?

multiple choice

No

Yes

b. How much is the $155,000 payment really worth if the odds of a coup d'tat are 15%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)