The risk of fire at a car assembly plant is 0.1%.If the firm will receive a payment of $40 million in one year if there is a fire during the year,what is the net present value (NPV)of purchasing insurance if the firm will face financial distress costs of $7 million and issuance costs of $1 million in the event of a loss if the risk-free rate is 5%?

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The Answer of The risk of fire at a car assembly plant is 0.1%.If the firm will receive a payment of $40 million in one year if there is a fire during the year,what is the net present value (NPV)of purchasing insurance if the firm will face financial distress costs of $7 million and issuance costs of $1 million in the event of a loss if the risk-free rate is 5%?

The Risk of Fire at a Car Assembly Plant Is