Your firm faces an 8% chance of a potential loss of $50 million next year. If your firm implements new safety policies, it can reduce the chance of this loss to 3%, but the new safety policies have an upfront cost of $250,000. Suppose that the beta of the loss is 0 and the risk-free rate of interest is 5%.

If your firm is fully insured, the NPV of implementing the new safety policies is closest to:

A. -$.25 million

B. $2.15 million

C. $2.5 million

D. $2.25 million

Rockwood Industries has 100 million shares outstanding, a current share price of $25, and no debt. Rockwood's management believes that the shares are under-priced, and that the true value is $30 per share. Rockwood plans to pay $250 million in cash to its shareholders by repurchasing shares. Management expects that very soon new information will come out that will cause investors to revise their opinion of the firm and agree with Rockwood's assessment of the firm's true value.

Assume that Rockwood is not able to repurchase shares prior to the market becoming aware of the new information regarding Rockwood's true value. After the release of the new information regarding the true value of Rockwood, and following the repurchase, the firm's share price is closest to:

A. $30.60

B. $30.00

C. $28.75

D. $31.50