Meeks Inc is based in the US and is considering setting up manufacturing operations in Ireland. Meeks believes the plant will generate sales of 200,000 units per year and expects the price of each unit to be 20. These sales and price figures are assumed fixed for the foreseeable future. The initial investment required is 2,000,000 which will be depreciated on a straight-line basis over 5 years. Production costs per unit are 15 of which 10 are for parent supplied components on which the parent generates a 5% profit margin. In addition, the Irish subsidiary will pay 3% of sales revenues as licensing fees to parent company and will remit dividends equaling 70% of net income to the parent company each year. Terminal value in year 5 is expected to be 2.5 million when Meeks Inc will sell the company and exit the Irish venture. The expected inflation in Ireland is 4% per annum while the expected inflation in the US is 3% per annum. The current exchange rate is $1.18 per . Corporate tax rate is 12.5% in Ireland and 35% in US. Cost of capital is assumed to be 18% for both parent and subsidiary.

Use the information provided above to estimate relevant cash flows and use them for your investment analysis. Highlight any assumptions made. Should Meeks Inc make this investment? Make a case to support your decision.