The Bata shoe company is considering a major investment in a new product, jungle safari boots. It hopes that this product will become a must wear pair of shoes especially to tourists visiting Kenya and Tanzania during the wildebeest migration which is one of the Seven Wonders of the World. The following information has been collected: i) The project will have a limited life of 11 years ii) The initial investment in plant and machinery will be Shs. 200 million and a marketing budget of Shs. 20 million will be allocated to the first year iii) The net cash flows before depreciation of plant and machinery and before marketing expenditure for each pair will be Shs. 3,000 iv) The products will be introduced in the remaining 10 years probability 0.7

1. If success is achieved in only one country in the first year, then for the remaining 10 years there is:
   1. A 0.4 probability of maintaining the annual salesat 70,000 pairs and
   2. A 0.6 probability of sales immediately falling to 5,000 pairsper year

If the marketing launch is unsuccessful in both countries, then production will cease and the project will be scrapped with zero value. The annual cash flows and marketing costs will be payable at each year end

Assume: Cost of capital is 10% per annum, no inflation and no exchange rates Required:

1. A probability tree depicting the above cash-flow possibilities
2. The expected NPV of the project

The expected monetary value of the project