Suppose that Firm BTG is currently the plaintiff in a patent infringement lawsuit. The ruling is expected in exactly one year. Let's say that there is a 20% chance that BTG will prevail in the lawsuit and a 80% chance that they will fail. If BTG wins the payout, it will increase Free Cash Flow by $100M. If they lose, BTG will receive nothing. BTG's CFO has decided to sell the expected FCF from the lawsuit to the capital market to raise funds now. Suppose that the discount rate for expected cash flows with similar risk to the lawsuit is 5%. The discount rate for the average stock in the stock market is 10%.

a. How much can BTG expect to raise from selling the right to collect the proceeds from the lawsuit to the capital market?

b. A colleague argues that since the lawsuit has an 80% chance of failing, the capital market will never pay money now for the right to collect any winnings in the future. Is he correct?