The following questions relate to Plants Inc. which operates under ideal conditions with the following circumstances:

• Operates a single fixed asset with a two year useful life
• Fixed asset will have no value after two ears and no disposal costs
• Interest rate economy wide is 10%
• The fixed asset will generate $500 if it is sunny (good) and $200 if it is cloudy (bad)
• There is a 75% chance that it will be sunny (good), and 25% chance that it will be cloudy (bad).

What is the net income in year 2 if it is sunny (good) in year 2 and cloudy (bad) in year 1?

What is the net income (loss) in year 1 if it is cloudy(bad)?