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Note: this question is likely to take longer than many others. Plan accordingly. Your firm, Mordin Solus Scientist Salarians, is considering launching its brand new product the Genophage in the country of Tuchanka. This is a project that you did not wish to work on. But it had to be you as someone else might have gotten it wrong. The Genophage project will cost an initial $85.000 million (i.e. 85 million Tuchankan dollars) up-front today and you estimate that it would produce the following free cash flows over the next three years (after which, the project would no longer be viable and you would terminate it): You estimate that Genophage-like projects should have a beta of 0.88. In addition, you may assume that the current market risk premium is 6.7% and that the risk-free rate is 3.3% per annum. Your firm is all equity financed. The Tuchankan government is currently experiencing a rebellion within their borders. You believe that there is an increasing chance with each passing year that your Genophage project assets would be attacked as the rebels are unfriendly toward corporate entities from your home country. In the event of an attack occurring in a given year, you estimate that Mordin Solus Scientist Salarians would recover 60% of your estimated free cash flows for that year of the attack from inventory that could be salvaged. However, due to the destruction of your production facilities, the project would not generate any cash flows in years after an attack has occurred. The below table shows the estimated probability of attack in each year of the project: Assume that you wish to insure the initial capital expenditure of the project against the risk of rebel attacks. The political risk insurance agency tells you that for every $100.000 Tuchankan dollars you wish to be paid out as compensation at the end of a year in which an attack occurred, you must pay $23.000 at the start of that year as your insurance premium. Assume that you decide to fully insure your initial capital expenditure. What is the NPV of the Genophage project in millions of Tuchankan dollars (to THREE decimal places) to Mordin Solus Scientist Salarians given the above political risk and your decision to take on political risk insurance? e.g. if your exact answer in dollars is "\$12,345,678 Tuchankan dollars", you would enter 12.346 into the answer box

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