Monk, Inc., is considering a capital budgeting project in Tunisia. The project requires an initial outlay of $1$ million Tunisian dinars; the dinar is currently valued at $$0\mathrm{.}65.$ In the first and

Activity Frame of operation, the project will generate $650,000$ dinars in each year. After two years, Monk will terminate the project, and the expected salvage value is $350,000$ dinars. Monk

has assigned a discount rate of $15$ percent to this project. The following additional information is available:

There is currently no withholding tax on remittances to the United States, but there is a $20$ percent chance that the Tunisian government will impose a withholding tax of $10$ percent

beginning next year.

There is a $60$ percent chance that the Tunisian government will pay Monk $250,000$ dinar after two years instead of the $350,000$ dinars it expects.

The value of the dinar is expected to remain unchanged over the next two years.

Let define:

Scenario $1$: No withholding taxes, $350,000$ dinar salvage value

Scenario $2$: $10\%$ withholding tax, $350,000$ dinar salvage value

Scenario $3$: $10\%$ withholding tax, $250,000$ dinar salvage value

Scenario $4$: No withholding taxes, $250,000$ dinar salvage value

a$.$ Determine the net present value of the project in each of the four possible scenarios. Do not round intermediate calculations. Round your answers to the nearest dollar.

NPV in Scenario $1$: $

NPV in Scenario $2$: $

NPV in Scenario $3$: $

NPV in Scenario $4$: $

b$.$ Determine the joint probability of each scenario. Round your answers to the nearest whole number.

Joint probability of Scenario $1$:

$\%$

Joint probability of Scenario $2$:

$\%$

$\%$

Joint probability of Scenario $3$:

$\%$

Joint probability of Scenario $4$:

$\%$

c$.$ Compute the expected NPV of the project. Do not round intermediate calculations. Round your answer to the nearest dollar.

$

Make a recommendation to Monk regarding its feasibility.

Monk

undertake the project.