The sales manager for tetsu, inc., a japanese maker of electronic components has just returned from the very price-sensitive usa market, searching for an exclusive distributor. the most promising usa prospect insists on a markup of 20% based on tetsu’s selling price. in japan, tetsu is used to typical markup of 20% based on their distributor’s selling price to the distributor’s customers. what would you recommend, if tetsu’s objective is a very competitive price, i. e., lower the usa exclusive distributor selling price the better? a. abandon the usa market and intensify operations in chinab. accept the usa distributor demand. it is even better for tetsu compared to japanc. appeal to the usa government to intervened. appeal to the japanese government to intervenee. reject the usa distributor terms which are worse for tetsu compared to japan

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?