Question
You were just promoted as the new manager of Hilton Hotel and Resorts and tasked to decide where to locate a new hotel. The finance
You were just promoted as the new manager of Hilton Hotel and Resorts and tasked to decide where to locate a new hotel. The finance department suggests that the Philippines is the best choice over Hong Kong-based on tax considerations. Specifically, your current-year tax savings from locating in the Philippines are $5 million but only $4 million in Hong Kong. On the other hand, the marketing department has provided you with sales estimates that suggest that the present value of the gross (of taxes) operating profits from locating in the Philippines are only $10 million but are $14 million for Hong Kong. It will cost $15 million to build the hotel in either location. Ignoring all other considerations, where should you build the hotel? What are your firm's economic profits if you locate the hotel in the Philippines?
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