Suppose that Sherman Co. a U.S. -based MNC is considering a plan to establish a subsidiary in Singapore. The MNC would establish the subsidiary using an upfront investment of $10,000,000 and would sell the subsidiary after four years. While it is confident in the values of certain parameters of the capital budgeting analysis, there is some substantial tisk in the tax rate on earnings remitted from Singapore as well as the salvage value. In particular, Sherman believes that there are two possible tax rates with the following probabilities. Possible Tax Rate Outcome 10.005 Probability of Outcome 70.00% 20.009 30.00% 100% Additionally, Sherman believes that there are two possible salvage values with the following probabilities Possible Salvage Value Outcome Probability of Outcome $12,000,000 60.00 $7,000,000 40.00% 100% Since there are two possible values for the tax rate, and two possible values for the salvage value, there are four total scenarios as outlined in the following table. Scenario withholding Tax 10.00% 1 2 20.00 Salvage Value S$12,000,000 S$12,000,000 S$7,000,000 5$7,000,000 3 10.00% 4 20.00% Given these scenarios, Sherman seeks to estimate the expected net present value of the project in the face of this uncertainty Consider scenario 2, where the tax rate on remitted eamings is 20.00% and the salvage value is S$12,000,000. A subsection of Sherman's capital budgeting analysis is shown in the following table, beginning with the Singapore dollars generated by the subsidiary that will be remitted to Sherman Complete row (35) of the table, filling in the taxes paid in Singapore dollars) on remitted funds in each year. The complete row (16), filling in the total after-tax Singapore dollara remitted to the parent in each year, Next, complete row (19), filing in the US dollar cash flow to the parent after Complete row (15) of the table, Filing in the taxes paid in Singapore dollars) on remitted funds in each year. Then complete row (16), Billing in the total after-tax Singapore dollars permitted to the parent in each year. Next, complete row (19), Ming in the U.S. dollar cash flows to the parent (atter taxes) Year 0 Year 2 Year Year 1 $7,000,000 $7,000,000 $8,000,000 SIS 14. S$ Remitted before Taxes 15. Taxes (20.00%) 16. After Tax 5$ Remit 17. Salvage Value 18. Exchange Rate of SS 19. After-Tax Cash Flows to Parent $0.50 $0.50 $0.50 aid (in Singapore dollars) on remitted funds in each year. Then complete row (16), filling in the nt in each year. Next, complete row (19), filling in the U.S. dollar cash flows to the parent (after Year 0 Year 1 Year 2 Year 3 Year 4 $7,000,000 $7,000,000 $8,000,000 $9,000,000 SE 55 SS SIS SIS SIS SIS $12.000.000 $0.50 $0.50 $0.50 $0.50 Suppose that Sherman Co. a U.S. -based MNC is considering a plan to establish a subsidiary in Singapore. The MNC would establish the subsidiary using an upfront investment of $10,000,000 and would sell the subsidiary after four years. While it is confident in the values of certain parameters of the capital budgeting analysis, there is some substantial tisk in the tax rate on earnings remitted from Singapore as well as the salvage value. In particular, Sherman believes that there are two possible tax rates with the following probabilities. Possible Tax Rate Outcome 10.005 Probability of Outcome 70.00% 20.009 30.00% 100% Additionally, Sherman believes that there are two possible salvage values with the following probabilities Possible Salvage Value Outcome Probability of Outcome $12,000,000 60.00 $7,000,000 40.00% 100% Since there are two possible values for the tax rate, and two possible values for the salvage value, there are four total scenarios as outlined in the following table. Scenario withholding Tax 10.00% 1 2 20.00 Salvage Value S$12,000,000 S$12,000,000 S$7,000,000 5$7,000,000 3 10.00% 4 20.00% Given these scenarios, Sherman seeks to estimate the expected net present value of the project in the face of this uncertainty Consider scenario 2, where the tax rate on remitted eamings is 20.00% and the salvage value is S$12,000,000. A subsection of Sherman's capital budgeting analysis is shown in the following table, beginning with the Singapore dollars generated by the subsidiary that will be remitted to Sherman Complete row (35) of the table, filling in the taxes paid in Singapore dollars) on remitted funds in each year. The complete row (16), filling in the total after-tax Singapore dollara remitted to the parent in each year, Next, complete row (19), filing in the US dollar cash flow to the parent after Complete row (15) of the table, Filing in the taxes paid in Singapore dollars) on remitted funds in each year. Then complete row (16), Billing in the total after-tax Singapore dollars permitted to the parent in each year. Next, complete row (19), Ming in the U.S. dollar cash flows to the parent (atter taxes) Year 0 Year 2 Year Year 1 $7,000,000 $7,000,000 $8,000,000 SIS 14. S$ Remitted before Taxes 15. Taxes (20.00%) 16. After Tax 5$ Remit 17. Salvage Value 18. Exchange Rate of SS 19. After-Tax Cash Flows to Parent $0.50 $0.50 $0.50 aid (in Singapore dollars) on remitted funds in each year. Then complete row (16), filling in the nt in each year. Next, complete row (19), filling in the U.S. dollar cash flows to the parent (after Year 0 Year 1 Year 2 Year 3 Year 4 $7,000,000 $7,000,000 $8,000,000 $9,000,000 SE 55 SS SIS SIS SIS SIS $12.000.000 $0.50 $0.50 $0.50 $0.50