Question 15 1 pts A U.S. firm is investing in a two year foreign project and is concerned about political risk. It forecasts a constant probability of expropriation throughout the life of the project of 9%. It does not expect to receive any cash flows if it does get expropriated. The firm decides to adjust for political risk only in the cash flows. The discount rate for this project is 12%. The firm's cash flows without considering political risk are: 0 1 2 Expected Free Cash Flow (Million USD) 25 15 Year 22 Taking into account political risk, the NPV of the project in USD is: 0.536 million 1.711 million 0.391 million 0.816 million Question 16 1 pts AU.S.firm is investing in a two year foreign project and is concerned about political risk. It forecasts probabilities of expropriation of 8% in the first year and 5% in the second year. It does not expect to receive any cash flows if it gets expropriated. The firm decides to adjust for political risk only in the cash flows. The discount rate for this project is 12%. The firm's cash flows without considering political risk are: Year 1 2 Expected Free Cash Flow (Million USD) - 25 Taking into account political risk, the NPV of the project in USD is: 0 15 22 1.256 million 2.650 million 2.821 million 1337 million Question 17 1 pts A U.S. form is investing in a two year foreign project and is concerned about political risk. It forecasts probabilities of expropriation of 8% in the first year and 5% in the second year. It expects to receive 5 million USD if it gets expropriated in either year and will not receive any cash flows subsequent to the year of expropriation. The firm decides to adjust for political risk only in the cash flows. The discount rate for this project is 12%. The firm' cash flows without considering political risk are: Year 0 2 Expected Free Cash Flow (Million USD) 25 15 22 Taking into account political risk, the NPV of the project in USD is: 1.797 million > 3.190 million 1.986 million 2.556 million