We-Mind-Our business Company is evaluating the following project. The initial investment is $40,000, there is 2/3 probability that the annual cash flow for each of the next 10 years will be $60000 and 1/3 probability it will be $150000. The risk-free is 7%, what is the maximum risk premium they could apply and still accept the project?

Options:

a. 25%

b. 13.1%

c. 18.3%

d. 11.3%

e. 9.7%

please show your math