B9. Question 1Firm DFG plans to open a foreign subsidiary through which to sell its manufactured goods in theEuropean market. It must decide between locating the subsidiary in Country A or Country B. Ifthe subsidiary operates in Country A, its gross receipts from sales will be subject to a 3 percentgross receipts tax. If the subsidiary operates in Country B, its net profits will be subject to a 42percent income tax. However, Country B's tax law has a special provision to attract foreigninvestors: 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 ofdollars):Gross receipts from salesCost of salesOperating expensesCountry A$220,000120,00044,000Country B$220,000120,00030,000DFG projects that it will operate the foreign subsidiary for 10 years (years 0 through 9) and thatthe terminal value of the operation at the end of this period will be the same regardless oflocation. Assuming a 6 percent discount rate, determine which location maximizes the NPV ofthe foreign operation.

Given in the question: Discount Rate = 6% Country A’s tax rate = 3% gross receipts tax Country B’s…

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. Assuming a 6 percent discount rate, determine which location maximizes the NPV of the foreign operation.

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. Assuming a 6 percent discount rate, determine which location maximizes the NPV of the foreign operation.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Data: So 101; X= 114; 1+r= 1.12. The two possibilities for sr are 143 and 85.
Find v in question c and find c in question d
The following information is provided for the first month of operations for Legal Services Inc.: A. The business was started by selling $103,000 worth of common stock. B. Six months' rent was paid in advance, $4,100. C. Provided services in the amount of $1,500. The customer will pay at a later date. D. An office worker was hired. The worker will be paid $277 per week. E. Received $520 in payment from the customer in "C". F. Purchased $300 worth of supplies on credit. G. Received the electricity bill. We will pay the $120 in thirty days. H. Paid the worker hired in "D" for one week's work. I. Received $130 from a customer for services we will provide next week. J. Dividends in the amount of $1,800 were distributed. Prepare the necessary journal entries to record these transactions. If no entry is required, select "No Entry Required" and leave the amount boxes blank. If an amount box does not require an entry, leave it blank. A. B. 111
How to solve:S= 1/1.06[1-1/(1.06)^20]/1-1/1.06
E14.2
Calculate: 1 1 (1+ r)" х 30 where r=0.093, and n=16
E10.15
That is not a possible solution. The possible anwsers are --> a. 122329.9877 b. 127159.8450 c. 122132.1253 d. 126907.4914 Please explain