Accounting

  • Garrison Appliances, Inc. is considering expanding its international presence. It sells 25% of all the toaster ovens sold in the United States but only 3% of the toaster ovens sold outside of the United States. The organization believes that it can sell more of its product if it has a production facility located overseas. Estimates concerning two possible locations, Mumbai and Bangalore, India follow:

    Possible Location

    Mumbai

    Bangalore

    Initial cash outlay

    $5,000,000

    $2,800,000

    Useful life

    20 years

    20 years

    Net cash inflows excluding depreciation

    $1,100,000

    $1,100,000

    The cost of capital

    9%

    9%

    Tax rate

    40%

    40%

    The Assignment:

    • Part 1: Prepare a spreadsheet using Excel or a similar program in which you compute the following for each proposed location:
      • Accounting rate of return on investment
      • Payback
      • Net present value
      • Internal rate of return

    Note: Be sure to view the media for this week before starting this Assignment.

    • Part 2: Utilizing Word or another word processing software program, prepare a written report for the Board of Directors:
      • Include a detailed explanation of the conclusion you reached regarding the feasibility of each proposal.
      • Explain any non-financial items (e.g., culture, language, etc.), which may impact the perceived desirability of each location.
      • Select the one location you recommend the Board invest in. Explain your rationale
      •    i need a one page report