CASE DETAILS

Multi-Diversified (MD) is an established, U.S.-based multinational corporation that is in the business of producing and selling widgets.MD is listed on the New York Stock Exchange (NYSE) and is required to report using U.S. GAAP.They are headquartered in Las Vegas, Nevada and employ nearly 50,000 people. Sustainability is a major part of their brand and company culture.MD voluntarily produces CSR reports in addition to their financials each period.

After performing a SWOT analysis, MD decided that they needed to expand manufacturing and sales internationally to areas that have low labor costs, low tax rates, and where there is a sufficient market demand for widgets.

Before selecting potential geographical areas for expansion, MD wants to gauge the international appetite for widgets by making export sales to large global markets including Russiaand France.They made the sales on September 1, 2020(sales price: 10,000 foreign currency units) and collected payment on September 30, 2020.

Management identified three potential international targets for a new and highly efficient production facility.Management estimates that they have $1,000,000 to initially invest.They need to reclaim their investment within 5 years and require a return of at least 5%.The information about these targets is below.

For whichever target MD chooses, MD plans to be very involved in day-to-day operations as well as determine sales prices, lend money to the target for wages and capital investment decisions, and have a significant amount of upstream and downstream transactions.

TARGET DETAILS

Location

Payback Period

ROI

NPV

IRR

Corporate Tax Rate

Proposed Sale Price

FV of Net Assets

BV of Net Assets

Alpha Company

Greece

10 years

5.23%

0.0

6.45%

29%

$5.6 million

$4.3 million

$3.6 million

Bravo Inc.

Australia

6.5 years

4.98%

1.0

4.93%

30%

$7.8 million

$6.8 million

$5.8 million

Charlie Ltd.

UK

3 years

5.5%

5.0

3.25%

34%

$4.4 million

$6.5 million

$5.8 million

Notes to Alpha Company's financial statements:

Greek firms, as part of the EU, are required to use IFRS as of 2005.This year Alpha invested heavily in AIresearch costs were 700,000 and development costs were 1.3 million Euros.

Notes to Bravo Inc.'s financial statements:

Bravo Inc. follows Australian GAAP, which is equivalent to IFRS.They use the revaluation method for measuring their PP&E and check for impairments each year.This year they reversed 500,000 Australian Dollar worth of impairments for their PP&E.

Notes to Charlie Ltd.'s financial statements:

UK firms are required to use UK GAAP, which is a modified and outdated version of IFRS.If they were using the up-to-date IFRS rules, they would have been forced to use an alternative inventory cost flow assumption and would miss out on cost savings of 76,000 British Pounds this period.

1. Please address the following points regarding the case.You are free to use your notes, textbook, and the internet.If you use the internet sources, please cite your source to avoid plagiaris.You should use your own words to answer the questions or face penalties