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Assume that J.C. Penney anticipated that there was a 10 percent chance that the Mexican government would temporarily prevent conversion of peso profits into dollars because of political conditions. This event would prevent J.C. Penney from remitting earnings generated in Mexico and could adversely affect the performance of these stores (from the U.S. perspective). Offer a way in which this type of political risk could be explicitly incorporated into a capital budgeting analysis when assessing the feasibility of these projects.

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