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Global Products, Inc. is a manufacturer of mini-computers and is planning to open another plant in...

Global Products, Inc. is a manufacturer of mini-computers and is planning to open another plant in a location outside of the United States. It is considering Bangaluru, India for one location, and Quito, Ecuador for the second location. It needs our help to determine which location is the best fit for the company. In addition to maximizing profitability, Global Products, Inc. also wants us to consider qualitative factors in our decision. The company has provided us with the following data. India initial investment $50k, Annual cash flows 20k, Operating Income 15k, Project life 5 years, Tax rate 30%, Cost of capital 10% Ecuador Initial Investment 150k, Annual Cash Flows 56k, Operating Income 40k, Project life 5 years, Tax rate 40%, Cost of capital 10%

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Answer #1

Calculation of Net Cash Inflow for both the locations:-

($ 50000) 8 75816 fordia - Lmitial hovedromunt lesent value of Cash flows (200000x 3.7908) Leia; Tax on Oberating income (160

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