Softek corporation forms a separate legal entity, Startek, to develop new technology. The entity is funded by $\backslash (\backslash$$ $2,000,000\backslash )$ in outside equity and $\backslash (\backslash$$ $26,000,000\backslash )$ in debt. Softek guarantees Startek's debt. The entity is expected to generate the following cash flows at the end of two years:

A discount rate of $10$ percent is appropriate.

Required

Assume qualitative analysis of Startek's VIE status is inconclusive. Quantitatively analyze whether Startek is a variable interest entity.

Instructions:$-$ Use negative signs with your answers, when appropriate.

$-$ Enter $\backslash (\backslash$$ $\backslash )$ answers in millions $(\backslash (\backslash$$ $11,000,000\backslash )$ equals $\backslash (\backslash$$ $11\backslash )$ million$).$

$-$ Enter Probability answers using decimals.