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 company 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, 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

$860,000



The cost of capital

9%

9%



Tax rate

40%

40%