ABC Co. plans to open a foreign subsidiary through which to sell its manufactured goods in the European market. It must decide between locating the subsidiary in Germany or England. if the subsidiary operated in Germany, its gross receipts from sales will be subject to a 3 percent gross receipts tax. If the subsidiary operated in Country England, its net profits will be subject to a 42 percent income tax. However, England's tax law has a special provision to attract foreign investors: No foreign subsidiary is subject to the income tax for the first three years of operations. ABC Co. projects the following annual operating results for the two locations: Germa n y Gross receipts from sales 0 Cost of Sales 0) Operating expenses 0) Net profit 0 $110,00 $110,000 (60,00 (60,000) (22,00 (15,000) $28,00 $35,000 ABC Co. projects that it will operate the foreign subsidiary for 10 years (years 0 thro ugh 9) and that the terminal value of the operation at the end of this period will be the same regardless of locations. Assuming a 5 percent discount rate, determine which location maximizes the NPV of the foreign operations. Where should ABC Co. should establish the foreign subsidiary (Hint: calculate after tax profit and its related NPV under the 2 scenarios. Refer to the annuity tables)