Company XYZ has been trying to establish its competitiveness at Mid-western USA, and now it is at the threat of facing bankruptcy. The company has made its calculation for deciding on whether to move the company or maintain it at its current position. The company used the Net Present Value method as a basis for its decision making. This method establishes the company projects that will be likely to have the greatest profit ("FMA," 2018).
Question 1: Location of Company
From the Corporate Manager calculations, it was observed that The Net Present Value (NPV) for the company in the U.S with 700 employees at Mid- Western and 3,000 employees in other areas in the U. S is NPV= $1,000,000. The corporate tax in the U.S is 35% which is the highest compared to the other countries. While corporate tax is 20%, he NPV for the company to move to Canada is $10,000,000. On the other hand, in as much as the corporate tax is 15% (which is the lowest compared to the other countries), the NPV for the company to move to Ireland is $35,000,000.. Since the company capital investment amount is the same in all the countries where the projects are being planned to be done, let’s assume that the initial capital being invested is $10,000,000. The company will use a further NPV index method to calculate the best option for them. The NPV index is the NPV/the initial capital investment. For the U.S the NPV index is 0.1, whereas the NPV index of Canada is 1 and the NPV index for Ireland is 3.5. From the calculation, it can be advised that the company should move to Ireland because the NPV index is the highest at 3.5 and the corporate tax is the lowest at 15% which will not lower the cash inflow of the company. Since the factory will not be as efficient as it is in the U.S, the less cost of tax reduced compared to the other countries should be used to re-invest back to the factory to increase efficiency. Lowering of costs is a way of increasing cash inflow, and this will be more effective in Ireland.
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Question 2: Stakeholders
The stakeholders in the decision making for the relocation of the company are the customers, the government agencies, creditors, debtors, suppliers, employees, and the shareholders. All these stakeholders must be put in consideration to make the best decision for the relocation of the company (Madura, Hoque, & Krishnamrti, 2018). In deciding on whether to move the company to Ireland the most important stakeholders in my decision making were the suppliers and creditors. In this case, there was a need to reduce the debts owed to them and maintain a good relationship. Since the company was going to bankruptcy, moving the company to Ireland would enable the company to make money and pay back this debt. For the customers, the decision was based on making good products at an efficient cost hence pricing the products at a competitive price. For the employees in the U.S, they would be highly affected by the move since it would affect around 3,700 employed people. The government of the U.S should take a big consideration of reducing their tax to reduce chances of companies relocating due to the tax cost (causing unemployment).
Question 3: Stewardship and Integrity
Financial Stewardship and Integrity are the most critical and crucial areas of successful strategic decision making-especially when involving an important change for the company (Madura, Hoque, & Krishnamrti, 2018). As the corporate manager, this was the first thing to consider in ensuring that I made a valid choice. The decision was made by ensuring that the objectives of the company future goals were being observed. Consequently, there was the consideration of ensuring that the wealth, assets and value of the company were well managed.
References
American Accounting Association. (2000). International journal of intelligent systems in accounting, finance & management . New York, NY etc.: John Wiley.
FMA. (2018). Retrieved from https://fmaonline.net/nonprofit-financial-management/financialresources/publications-tools-links/financial-integrity-requires-more-than-good-accountants/
Madura, J., Hoque, A., & Krishnamrti, C. (2018). International financial management .
Net Present Value (NPV) Method - Explanation, Example, Assumptions, Advantages, Disadvantages. (2017, April 24). Retrieved from https://www.accountingformanagement.org/net-present-value-method/
