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The founder of a U.S. provider of geographic information system services focused on sustainability must decide whether to open a Canadian facility. The facility would be in operation for five years and enough information is provided for a detailed cross-border capital budgeting analysis. In addition to introducing foreign currency issues, the case provides exposure to subscription-based revenue streams and discussion of relevant costs.
The general learning objective is to develop capital budgeting skills and introduce techniques for addressing foreign currency cash flows. More detailed objectives are modeling revenue streams from a subscription forecast; modeling cost structure; acknowledging depreciation and salvage values; converting foreign currencies; and exploring issues related to the identification of decision-relevant revenues and costs.