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Softek corporation forms a separate legal entity, Startek, to develop new technology. The entity is...

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Accounting

Softek corporation forms a separate legal entity, Startek, to develop new technology. The entity is funded by \(\$ 2,000,000\) in outside equity and \(\$ 26,000,000\) 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 \(\$ \) answers in millions (\(\$ 11,000,000\) equals \(\$ 11\) million).
- Enter Probability answers using decimals.
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