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Given the above, what is the NPV of the project? Would you accept the project?
Question 2
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
25% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 17.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 3
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$6.00 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 4
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 6
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
30% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 19.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 7
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$7.30 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 8
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 10
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
15% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 24.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 11
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$4.90 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 12
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 14
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
25% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 21.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 15
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$6.80 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 16
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 18
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
25% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 17.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 19
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$4.70 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 20
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 22
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
35% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 15.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 23
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$3.80 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 24
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 26
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
15% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 25.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 27
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$4.50 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 28
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 30
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
35% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 13.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 31
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$6.30 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 32
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 34
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
20% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 18.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 35
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$3.80 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 36
By how much does the insurance contract increase or decrease the NPV of the
project?
Given the above, what is the NPV of the project? Would you accept the project?
Question 38
Due to the recent collision of The Citadel with a Galactic Federation prison, The
Citadel is currently experiencing a severe fiscal crisis and the ruling council has
threatened to nationalize foreign-owned assets. You now estimate that there is a
20% chance in any given year that your project assets will be expropriated without
compensation. The cost of capital of 13.0% p.a. used in the previous question
does not factor in any such risk of expropriation.
What is the NPV of your project now? Would you accept the project?
Question 39
Your Federation Insurance Bureau contact, Jerry Smith, informs you that your
firm can be provided with political risk insurance. This would compensate your
firm with today’s estimate of the uninsured project’s NPV at the end of the year
in which your assets were seized. The insurance contract requires payment of its
$5.40 million annual fee at the start of each year of coverage.
What is the NPV of your project now? Would you insure the project?
Question 40
By how much does the insurance contract increase or decrease the NPV of the
project?
Partial Solutions
Answer 1:
Answer 2:
Answer 3:
The estimated NPV of $23.73m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $21.57m.
As the NPV of the insured project is less-positive than the NPV of the uninsured
project, we would accept the project but not insure it.
Answer 4:
Answer 5:
Answer 6:
Answer 7:
The estimated NPV of $25.10m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $23.02m.
As the NPV of the insured project is less-positive than the NPV of the uninsured
project, we would accept the project but not insure it.
Answer 8:
Answer 9:
Answer 10:
Answer 11:
The estimated NPV of $35.52m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $34.03m.
As the NPV of the insured project is less-positive than the NPV of the uninsured
project, we would accept the project but not insure it.
Answer 12:
Answer 13:
Answer 14:
Answer 15:
The estimated NPV of $28.21m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $26.03m.
As the NPV of the insured project is less-positive than the NPV of the uninsured
project, we would accept the project but not insure it.
Answer 16:
Answer 17:
Answer 18:
Answer 19:
The estimated NPV of $18.42m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $16.66m.
As the NPV of the insured project is less-positive than the NPV of the uninsured
project, we would accept the project but not insure it.
Answer 20:
Answer 21:
Answer 22:
Answer 23:
The estimated NPV of $15.09m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $16.72m.
As the NPV is more positive when we insure the project than when we don’t, we
would both accept the project and insure it.
Answer 24:
Answer 25:
Answer 26:
Answer 27:
The estimated NPV of $31.60m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $29.86m.
As the NPV of the insured project is less-positive than the NPV of the uninsured
project, we would accept the project but not insure it.
Answer 28:
Answer 29:
Answer 30:
Answer 31:
The estimated NPV of $17.34m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $15.40m.
As the NPV of the insured project is less-positive than the NPV of the uninsured
project, we would accept the project but not insure it.
Answer 32:
Answer 33:
Answer 34:
Answer 35:
The estimated NPV of $26.83m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $28.66m.
As the NPV is more positive when we insure the project than when we don’t, we
would both accept the project and insure it.
Answer 36:
Answer 37:
Answer 38:
Answer 39:
The estimated NPV of $26.26m (from the previous question) is the insurance
compensation in the event of expropriation.
The NPV after factoring in the insurance payouts and the up-front insurance fees
is $24.33m.
As the NPV of the insured project is less-positive than the NPV of the uninsured
project, we would accept the project but not insure it.
Answer 40: