Keep-it plc, a UK based company which manufactures security equipment for commercial and residential buildings and estates, currently has had surplus cash reserves to invest following the sale of an old factory building. The company is investigating expanding overseas so that it can enter into new markets and hence boost its revenue and profits. One of the Directors of Keep-it plc has dual nationality (she is also a national of Craigland), and she is keen for the company to investigate the possibility of launching Keep-it's products in Craigland, where the recent change of the foreign direct investment policies has rejuvenated the economy. This has led to many new residential and manufacturing estates being built in Craigland along with the need to install up-to-date security equipment. However, Keep-it plc has identified that expanding the UK production then exporting and fitting its products in Craigland may be difficult and the costs involved are likely to be high. The expected sales in Craigland are unlikely to be high enough to cover such high export costs from the UK and make profits. Therefore, Keep-it plc is investigating whether producing the equipment in Craigland would be possible. There are many empty factories available in Craigland and so Keep-it plc can purchase and fit out a suitable property for a total cost of C$8,500,000. The costs of running the premises, including the office staff and managers, are estimated to be C$1,500,000 per year in current terms and are only expected to rise at an average of 2% per year, in spite of the high inflation in the country as labour is cheap and plentiful. Sales are expected to be C$8,000,000 each year and these are prudently estimated to remain at this level for the length of the project in Craigland. Variable costs will be 30% of the sales revenue. Taxation in Craigland is currently 21% and in the UK Keep-it plc pays tax at 23%. Both taxes are paid in the year of sale. There are no capital allowances available for the factory in Craigland or in the UK. pany assess projects using Keep-it plc currently has a cost of capital of 10%. The a four-year useful life period