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    Aug 1, 2012, 07:13 PM
    Accounting home work question
    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%

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