ABSTRACT
ENCO Ventures, an energy company, must select between two projects, both of which involve the development of a power plant abroad. For Project A, ENCO estimates that the investment cost will be $50 million and that the total revenue for the ‚rst 5 years of operation will be either $80, $90, or $110 million. There is, however, an estimated 20% chance that the local government will take over the operation of the plant once it is ‚nished and repay ENCO only the original investment cost. Project B also requires a $50 million investment. Total revenue for the ‚rst 5 years of operation is projected at $66, $80, or $90 million. In this second country, there is no chance that the government will take over the project once it is completed.
