• Expansion into Western Europe has a forecast to increasesales/revenues and cost of sales by 10% per year for 5 years.
• Annual sales for the previous year were $20 million.
• COGS was 12,000
• Start-up costs are projected to be $7 million and an upfront needed investment in net working capital of $1 million. The working capital amount will be recouped at the end of year 5.
• Because of the higher European tax rate, the marginal corporate tax rate is presumed to be 30%.
• Being a risky investment, the required rate of return of the project is 12%.