Account case study

Garrison Appliances, 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, Mumbai and Bangalore, India follow:

Possible Location Mumbai Bangalore

Initial cash outlay $5,000,000 $2,800,000

Useful life 20 years 20 years

Net cash inflows excluding

depreciation

$1,100,000 $860,000

The cost of capital 9% 9%

Tax rate 40% 40%

Part 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

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