Garrison appliances is considering expanding its

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Garrison Appliances is considering expanding its international presence. The company believes it can sell more of its product if it has a production facility located oversees. Estimates concerning two locations are as follows:

Mumbai:

  • Initial Cash Outlay: $5,00,000
  • Useful Life: 20 Years
  • Net Cash inflow excluding depreciation: $1,100,000
  • Cost of Capital: 9%
  • Tax Rate 40%

Bangalore:

  • Initial Cash Outlay: $2,800,000
  • Useful Life: 20 Years
  • Net Cash Inflow excluding depreciation: $860,000
  • Cost of Capital: 9%
  • Tax Rate: 40%

Determine the following for each Location: 1. average rate of return on investment 2. payback period 3. net present value 4. profitability index 5. internal rate of return. 6.Should the company invest in either location...why or why not?

Reference no: EM13622681

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