Assume the same facts as in Problem 22-27, except that the plant is located in Kamloops, B.C. Pro Chips has no special waiver on income taxes. It pays a 30% tax rate on all income. Proceeds from sales of equip ment above book value are taxed at the same 30% rate.
1. Prepare a schedule of relevant after-tax cash inflows and outflows of the modernize and replace alternatives over the 2013 to 2019 period.
2. Calculate net present value of the modernize and replace alternatives.
3. Suppose Pro Chips is planning to build several more plants. It wants to have the most advantageous tax position possible. Pro Chips has been approached by Spain, Malaysia, and Australia to construct plants in their countries. Use the data in Problem 22-27 and this problem to briefly describe in qualitative terms the income tax features that would be advantageous to Pro Chips.