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Running head: ANALYSIS TO HUMAN AND CULTURAL DIVERSITY
Economic Analysis to Human and Cultural Diversity
Name
Institutional Affiliation
1
ANALYSIS TO HUMAN AND CULTURAL DIVERSITY
2
Economic Analysis to Human and Cultural Diversity
Report Analysis
The net present value, also abbreviated NPV, denotes the difference between the present
value of an organization or an investment’s cash inflows and the present cash outflows within a
particular time. In particular, NPV is usually used within the field of capital budgeting. It is also
an important concept within the field of investment planning, especially in evaluating the level of
profitability of a given or projected investment (project). In this case, this report evaluated two
kinds of investments, one in the United States and the other in Ireland, in effort to compare
which among the two investments was a viable one.
My company wished to build a new manufacturing facility that could cost 2 million
dollars for plant construction and 800,000 dollars for machinery. The facility would was
expected to have a net annual cash flow of 750,000 dollars over the next ten years. It was
supposed to be developed in the two particular countries, the United States and Ireland, where
the total incremental tax level would be 45 percent (United States). However, the project was
also considered in another country, in the Ireland. Calculating the net present value for the two
countries, the value was important in giving information where the investment was profitable
within the two nations. An interest rate of 8 percent was assumed for both countries.
The net cash flows for the United States can be shown in the following table. It has a
negative value of -32,091 dollars. It means that if the investment would be located in the United
States, it would not be profitable because the net present value of the project is a negative value.
As such, the United States would not be a good location to build the facility given that it will not
generate excellent returns upon its operations.
ANALYSIS TO HUMAN AND CULTURAL DIVERSITY
Ye
ar
Cost of
Cost of
Inco
After tax
Building
Machinery
me
Tax
income
($2,000,00
($2,800,00
0
0)
($800,000)
0)
$750, $337,
1
000
500
$412,500
$750, $337,
2
000
500
$412,500
$750, $337,
3
000
500
$412,500
$750, $337,
4
000
500
$412,500
$750, $337,
5
000
500
$412,500
$750, $337,
6
000
500
$412,500
$750, $337,
7
000
500
$412,500
$750, $337,
8
000
500
$412,500
$750, $337,
9
000
500
$412,500
$750, $337,
10
000
500
$412,500
Net present
value (NPV)
3
PVF@ PV of
PVF
8%
Amount
0.92592 1.0000 ($2,800,0
5926
00
00)
0.92592 0.9259
5926
26 $381,944
0.92592 0.8573
5926
39 $353,652
0.92592 0.7938
5926
32 $327,456
0.92592 0.7350
5926
30 $303,200
0.92592 0.6805
5926
83 $280,741
0.92592 0.6301
5926
70 $259,945
0.92592 0.5834
5926
90 $240,690
0.92592 0.5402
5926
69 $222,861
0.92592 0.5002
5926
49 $206,353
0.92592 0.4631
5926
93 $191,067
($32,091)
However, if the facility were to be opened in Ireland, it will offer a great opportunity for the
company since it is highly viable. In particular, the net present value of the investment in Ireland
is a positive value ($2,232,561) as shown in the following table. With a positive value, it means
that the project will be profitable, and therefore, it would be recommended for the company to
open the facility in Ireland as opposed to the United States.
0
1
2
3
4
5
6
7
($2,000,000)
($800,000)
($2,800,000)
750,000
750,000
750,000
750,000
750,000
750,000
750,000
1
0.9259259
0.8573388
0.7938322
0.7350299
0.6805832
0.6301696
0.5834904
($2,800,000)
$694,444
$643,004
$595,374
$551,272
$510,437
$472,627
$437,618
ANALYSIS TO HUMAN AND CULTURAL DIVERSITY
8
9
10
750,000
750,000
750,000
Net present Value (NPV)
4
0.5402689
0.5002490
0.4631935
$405,202
$375,187
$347,395
$2,232,561
ANALYSIS TO HUMAN AND CULTURAL DIVERSITY
5
Appendix
Investment in the USA
Ye
ar
Cost of
Cost of
Inco
After tax
Building
Machinery
me
Tax
income
($2,000,00
($2,800,00
0
0)
($800,000)
0)
$750, $337,
1
000
500
$412,500
$750, $337,
2
000
500
$412,500
$750, $337,
3
000
500
$412,500
$750, $337,
4
000
500
$412,500
$750, $337,
5
000
500
$412,500
$750, $337,
6
000
500
$412,500
$750, $337,
7
000
500
$412,500
$750, $337,
8
000
500
$412,500
$750, $337,
9
000
500
$412,500
$750, $337,
10
000
500
$412,500
Net present
value (NPV)
PVF@ PV of
PVF
8%
Amount
0.92592 1.0000 ($2,800,0
5926
00
00)
0.92592 0.9259
5926
26 $381,944
0.92592 0.8573
5926
39 $353,652
0.92592 0.7938
5926
32 $327,456
0.92592 0.7350
5926
30 $303,200
0.92592 0.6805
5926
83 $280,741
0.92592 0.6301
5926
70 $259,945
0.92592 0.5834
5926
90 $240,690
0.92592 0.5402
5926
69 $222,861
0.92592 0.5002
5926
49 $206,353
0.92592 0.4631
5926
93 $191,067
($32,091)
Investment in Ireland
0
1
2
3
4
5
6
7
8
9
10
($2,000,000)
($800,000)
Net present Value (NPV)
($2,800,000)
750,000
750,000
750,000
750,000
750,000
750,000
750,000
750,000
750,000
750,000
1
0.9259259
0.8573388
0.7938322
0.7350299
0.6805832
0.6301696
0.5834904
0.5402689
0.5002490
0.4631935
($2,800,000)
$694,444
$643,004
$595,374
$551,272
$510,437
$472,627
$437,618
$405,202
$375,187
$347,395
$2,232,561
ANALYSIS TO HUMAN AND CULTURAL DIVERSITY
6

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