Your company wants to build a new manufacturing facility which will cost $2 million for plant building and $800,000 for machinery. It will have a net annual cash flow of $750,000 for the next 10 years.
You could build it in your US location where your total incremental tax rate would be 45%. However you are also considering building it in Ireland.
Calculate the after tax present worth of adding a new manufacturing facility in each of the two countries and determine where it would be better to place the investment. Assume that the interest rate is 8% per year. You will need to research tax methods and depreciation rules in Ireland, and compare with those of the US. Use these results to recommend where to make the investment.
Write a report in MS Word file format to present and justify your decision. Discuss the effects of the financial issues in the decision process. Present your analysis as an appendix to your report.
Your work will be evaluated for the accuracy of the numerical analysis (10 pts) and the depth and relevance of the various other issues that you have considered in the decision process (10 pts), and finally the quality of writing (6 pts).
Each team of student will be responsible for generating a sales forecast for a selected industry or multi-national firm using econometric methods, using a sales data set collected from available sources of Compustat or the Bloomberg system. In addition, students must gather information on relevant measures of prices, income, advertising data, and other relevant (socioeconomic) data to support the construction of a multi-variate regression model. The student must build the econometric model utilizing Excel or Eviews. Results of the analysis must include (a) an executive summary of the outcomes; (b) information supporting the choice of the variables, including the socio-economic variables (model specification), (c) interpretation of the elasticities and the implication to pricing strategy; and (d) interpretation of the results with implications to business policy.
For the purpose of assurance of learning, four scores will be provided. The basis for these scores are the ability to (a) provide a justification, including ethical considerations, for the model specification based on relevant theory and gather the appropriate data (MBA-2M); (b) use Excel/EViews to generate forecasted demand outcomes (MBA-1M); (c)) discuss the relevant economic implications of the estimated elasticities (MBA-ECON); and (d) suggest meaningful implications that inform business policy of a multi-national firm (MBA-MGMT).
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