1. Prepare a spreadsheet using Excel or a similar program in which you compute the following for...
Question:
1. Prepare a spreadsheet using Excel or a similar program in which you compute the following for each proposed location.
Accounting rate of return on investment
Payback
Net present value
Internal rate of return
The Better Toast Company, Inc.
The Better Toast Company, Inc. is considering expanding its international presence. It sells 25% of all the toaster ovens sold in the United States but only 3% of the toaster ovens sold outside of the United States. The organization believes that it can sell more of its product if it has a production facility located overseas. Estimates concerning two possible locations, Phnom Penh, Cambodia and Mandalay, Myanmar follow:
Possible Location | Phnom Penh, Cambodia | Mandalay, Myanmar |
Initial cash outlay | $4,500,000 | $2,500,000 |
Useful life | 20 years | 20 years |
Net cash inflows excluding depreciation | $1,005,000 | $785,000 |
The cost of capital | 9% | 9% |
Tax rate | 40% | 40% |
Part 2:
Utilizing Word or another word processing software program, prepare a written report for the Board of Directors. The intended audience is clear from the salutation and the language used throughout the report.
Include a detailed and thorough explanation of the conclusion you reached regarding the feasibility of each proposal supported by the calculations prepared in Part 1.
Explain at least five non-financial items (e.g., culture, language, etc.), which may impact the perceived desirability of each location.
Select the one location you recommend the Board invest in. Explain your rationale in precise and detailed language.
Accounting
ISBN: 978-0324188004
21st Edition
Authors: Carl s. warren, James m. reeve, Philip e. fess