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Suppose your multinational corporation has made an initial investment of $20 million in a foreign...

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Finance

Suppose your multinational corporation has made an initial investment of $20 million in a foreign project with a WACC of 15% and that generates annual cashflow of $5 million forever. If there is a possibility that the foreign government may expropriate your project assets in the third year of the project how will you take this into account in evaluating the foreign project?

Question options:

use the NPV technique which accommodates expropriation

use binomial model that captures expropriation probability

use APV technique that captures expropriation probability

use CCA technique which accommodates expropriation

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