Bijaksana Co. is a non-profit educational institution thatwants to import educational software products from Hong Kong and sell them in Malaysia. It wants to assess the net present value of this project since any profits it earns will be used for its foundation. It expects to pay HK$1.2 million for the imports. Assume the existing exchange rate is HK$1 =MYR0.55. It would also incur selling expenses of MYR1 million to sell the products in Malaysia. It would be able to sell the products in Malaysia for MYR1.8 million.

Bijaksana's required rate of return on this project is 22%.

What is the project's expected net present value?

However, it is concerned about two forms of country risk. First, there is a high chance that the Hong Kong dollar will be revalued to be worth HK$1 = MYR0.60 by the Hong Kong government. Second, there is a high chance that the Hong Kong government imposes a special tax of 10% on the amount that Malaysian importers must pay for Hong Kong exports.

What is the project's expected net present value, considering the two forms of country risks?

What is the difference between the two expected NPVs, with and without the risks?