Firm DFG 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 Country X or Country Z. If the subsidiary operates in Country X, its gross receipts from sales will be subject to a 3 percent gross receipts tax. If the subsidiary operates in Country Z, its net profits will be subject to a 42 percent income tax. However, Country Zs 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.

DFG projects the following annual operating results for the two locations (in thousands of dollars). Use Appendix A and Appendix B.

	Country X			Country Z
Gross receipts from sales	$	110,000		$	110,000
Cost of sales		(60,000	)		(60,000	)
Operating expenses		(22,000	)		(15,000	)
Net profit	$	28,000		$	35,000
DFG projects that it will operate the foreign subsidiary for 10 years (years 0 through 9) and that the terminal value of the operation at the end of this period will be the same regardless of location. Assume a 5 percent discount rate. a. Determine the NPV of Country X. (Round discount factor(s) to 3 decimal places, and intermediate calculations to the nearest whole number. Compute your intermediate values and final answers in thousands of dollars.) b. Determine the NPV of Country Z. (Round discount factor(s) to 3 decimal places, and intermediate calculations to the nearest whole number. Compute your intermediate values and final answers in thousands of dollars.)