Sanford Pipe Ltd. is a Canadian corporation operating a profitable business in eastern Canada. Four years ago, the company attempted to expand its operations to northern Mexico. At that time, Sanford invested $700,000 in a newly created Mexican subsidiary corporation. That corporation used those funds to acquire special equipment and as working capital for the new venture.
From the beginning, the foreign operations were plagued by a number of unexpected setbacks, including labour and production problems. As these setbacks occurred, Sanford contributed additional cash to keep the operations afloat. Sanford finally recognized that the Mexican subsidiary had no future and decided to close it. After the equipment was sold and all liabilities were paid, the Mexican corporation was wound up, and Sanford received $200,000.
The financial results of the Mexican venture are summarized below.

The president of Sanford regretted the decision to undertake the foreign expansion. Not only did it result in a substantial loss, but the cash requirements also resulted in the company forgoing a number of other opportunities that could have yielded 15% after tax.
Assume Sanford is subject to a 25% corporate tax rate.
Required:
1. Determine the after-tax loss in cash flow terms to Sanford as a result of the foreign venture.
2. If the foreign venture had been organized as a foreign branch of Sanford, how much would it have lost?

osses Cashprovided Year incurred by Sanford 20X1 20X2 20X3 20X4 S300,000 200,000 200,000 100,000 $800.000 S 700,000 100,000 200,000 $1.000.000