You are an investment analyst domiciled in Country Z doing a cross-country comparison of the financial performance of two manufacturing companies in the pharmaceuticals industry. Both companies, X and Y (located in Countries X and Y), have similar expected sales of $600 million. Country X has a corporate income tax. Country Y has no income tax, but relies on indirect taxes. Selected data for companies X and Y are as follows:

Required:
Determine which company promises to have the better financial performance?
What tax considerations might affect your conclusions?

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Company V $120 million$72 million 12.0% Company 1 Pretax income Return on sales 12.0%