Your company wants to build a new manufacturing facility which will cost $2.5 million for plant and machinery. It will have a net annual income 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 considering building it in Ireland.
Calculate the after tax present worth of adding a new manufacturing facility in each of the two countries (Ireland and the USA) and determine where it would be better to place the investment. 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 to present and justify your decision. Discuss the effects of the financial issues in the decision process. Present your numerical analysis as an appendix to your report.
Some extra notes:
To find the PV after taxes, you need a MARR. You may assume a MARR or use 5%.
However, instead of PV, you can calculate the after tax rate of return. You do not need to know an interest rate for this.
Assume all investment costs are inside the building; you do not use the real estate tables for MACRS.
While the project will last for 10 years, The MACRS life for the investment is to be five (5) years.
If you have submitted work and you used other assumptions, you will be fine if you stated what those assumptions were.
BTW–You can submit your work 3 ways (and if you have submitted it already we will work with you.):
1) In two files: a Word file for the text and an Excel file covering the analysis. You would refer to the Excel file in the Word file.
2) Or you can write in Word and you can copy your Excel cells into the Word doc.
3) Or you can write your text into your Excel file