Question Tag: Foreign Investment

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FM – Nov 2016 – L3 – Q4 – International Financial Management

Evaluate a foreign investment decision for Gugi Plc, including cash flow, tax, and exchange rate considerations.

Gugi Plc. is a highly successful manufacturing company operating in Nigeria. In addition to sales within Nigeria, the company also exports to a foreign country (with currency F$) along the ECOWAS sub-region. The export sales generate annual net cash inflow of ₦50,000,000.

Gugi Plc. is now considering whether to establish a factory in the foreign country and stop export from Nigeria to the country. The project is expected to cost F$1 billion, including F$200 million for working capital.

A suitable existing factory has been located, and production could commence immediately. A payment of F$950 million would be required immediately, with the remainder payable at the end of year one. The following additional information is available:

Details Figures
Annual production and sales 110,000 units
Unit selling price F$5,000
Unit variable cost F$2,000
Unit royalty payable to Gugi Plc ₦300
Incremental annual cash fixed costs F$50 million

Assume that the above cash items will remain constant throughout the expected life of the project of 4 years. At the end of year 4, it is estimated that the net realizable value of the non-current assets will be F$1.40 billion.

It is the policy of the company to remit the maximum funds possible to the parent (i.e., Gugi Plc.) at the end of each year. Assume that there are no legal complications to prevent this.

If the new factory is set up and export to the foreign country is stopped, it is expected that new export markets of a similar worth in North Africa could replace the existing exports. Production in Nigeria is at full capacity, and there are no plans for further capacity expansion.

Tax on the company’s profits is at a rate of 40% in both countries, payable one year in arrears. A double taxation agreement exists between Nigeria and the foreign country, and no double taxation is expected to arise. No withholding tax is levied on royalties payable from the foreign country to Nigeria.

Tax-allowable “depreciation” is at a rate of 25% on a straight-line basis on all non-current assets.

The Directors of Gugi Plc. believe that the appropriate risk-adjusted cost of capital of the project is 13%.

Annual inflation rates in Nigeria and the foreign country are currently 5.6% and 10%, respectively. These rates are expected to remain constant in the foreseeable future. The current spot exchange rate is F$1.60 = ₦1. You may assume that the exchange rate reflects the purchasing power parity theorem.

Required:

(a) Evaluate the proposed investment from the viewpoint of Gugi Plc.
Notes:

  • Show all workings and calculations to the nearest million.
  • State all reasonable assumptions. (18 Marks)

(b) State two further information and analysis that might be useful in evaluating this project. (2 Marks)

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ATAX – Nov 2020 – Q4 – Taxation of Companies

Write a report on Nigerian tax incentives and their objectives for a Mexican investor planning to explore the Nigerian market.

The quest by various governments in Nigeria since the 1990s to use tax incentives to change the narrative of being a mono-product foreign exchange earner has attracted interests from both local and foreign investors to the hitherto forgotten non-oil sector. However, some of the foreign investors are not conversant with these tax incentives available to investors in the manufacturing, mining, and telecommunication industries.

You have been appointed as a tax consultant to a Mexican billionaire through his agent in Nigeria, IBK Associates, with interests in many sectors such as agriculture, aviation, manufacturing, and telecommunication in the Latin American region. He intends to explore the Nigerian business environment within the next six months.

Required:
You are to write a report to the Mexican through his agent in Nigeria highlighting the following areas:
a. Objectives of Nigerian tax incentives (4 Marks)
b. Forms of tax incentives (2 Marks)
c. Various tax incentives available to operators in the:
i. Manufacturing sector (6 Marks)
ii. Agriculture (2 Marks)
iii. Telecommunications (2 Marks)
d. Other non-tax factors foreign investors consider in determining a jurisdiction as an investment destination (4 Marks)

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ATAX – Nov 2018 – L3 – Q4a – Tax Incentives and Reliefs

Explanation of Foreign Direct Investment and incentives for foreign investors in Nigeria.

(a) Write a short note on Foreign Direct Investment (FDI) and incentives available to foreign investors in Nigeria.

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TAX – May 2023 – L2 – SC – Q7 – Tax Incentives and Reliefs

Explain tax incentives and penalties for enterprises in export processing zones.

The Federal Government in a bid to further boost the growth in foreign exchange earnings, create new jobs, facilitate economic diversification, industrialization, and provide access to foreign technology, came up with its export processing zones (EPZs) policy.

EPZ is regarded as a customs area where an enterprise is allowed to import plant, machinery, equipment, and raw materials, process them, and then export them to the world market, under security and without paying duty.

To facilitate a better understanding of the above assertions, the Managing Director of a would-be client approached you for explanations of the relevant provisions of the Nigerian Export Processing Zones Act Cap. N107 LFN 2004 (as amended) and Companies Income Tax Act Cap. C21 LFN 2004 (as amended).

Required:

a. Discuss SIX special tax incentives for enterprises operating in an export processing zone. (12 Marks)

b. Explain the penalties for non-compliance with section 55(1) of CITA (as amended). (3 Marks)

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SCS – MAR 2024 – L3 – Q5c – International financial management

Evaluate the factors restricting foreign investment despite potential good returns.

With reference to Option Three, evaluate the factors that restrict foreign investment despite the perceived potential for good returns. 

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AFM – Nov 2018 – L3 – Q1b – Economic environment for multinational organisations

Advising One-Village on the risks associated with a proposed irrigation project in a Sub-Saharan African country based on the World Bank Doing Business Report.

The directors of One-Village are considering another irrigation project in a country in Sub-Saharan Africa. The World Bank’s Doing Business Report for 2017 ranked the destination country 140th out of 190 countries on the ease of doing business. Below is the ease of doing business statistics for the destination country and One-Village’s home country as reported in the Doing Business 2017 report.


Required:
Advise the directors on four risks or issues One-Village should consider when deciding on whether to implement the proposed irrigation project in the destination country, and suggest how the risks or issues may be mitigated or resolved.
(8 marks for risks and mitigation)

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AT – May 2021 – L3 – Q3a – International Taxation

Explain how foreigners should participate in business activities in Ghana under the GIPC Act, 2013 (Act 865).

Ghana Investment Promotion Centre (GIPC) is a governmental agency established to promote, co-ordinate, and facilitate investment in Ghana. In its efforts at promoting both local and foreign investments in Ghana, it has mounted a series of lectures to drum home this fact and has done so well over the years in this regard.

Required:
In line with the GIPC Act, 2013 (Act 865), how should foreigners participate in business activities in Ghana?

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AT – MAR 2024 – L3 – Q5b – Tax Administration in Ghana

Discusses the restrictions on foreign business activities and the tax benefits of sole proprietorship versus limited liability companies.

You are an external consultant to the Ministry of Trade and Industry. The Minister has received a delegation of both foreigners and Ghanaians to deliberate on investment opportunities available in Ghana.

Required:
i) Business activities that cannot be engaged in by foreigners. (5 marks)
ii) The tax benefits of establishing a sole proprietorship business as against a limited liability company. (5 marks)

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AT – Nov 2023 – L3 – Q1a – Tax administration in Ghana

Discuss three ways a foreigner may participate in business activities in Ghana under the GIPC Act.

Ghana has a lot of opportunities for both local and foreign investors. The Ghana Investment Promotion Centre has demonstrated in many ways the policy consideration behind the promotion of investment to both Ghanaians and foreigners.

Foreigners must meet certain basic conditions before they are permitted to undertake business activities in Ghana.

Required:
Discuss THREE (3) ways a foreigner may participate in business activities in Ghana.

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FM – Nov 2016 – L3 – Q4 – International Financial Management

Evaluate a foreign investment decision for Gugi Plc, including cash flow, tax, and exchange rate considerations.

Gugi Plc. is a highly successful manufacturing company operating in Nigeria. In addition to sales within Nigeria, the company also exports to a foreign country (with currency F$) along the ECOWAS sub-region. The export sales generate annual net cash inflow of ₦50,000,000.

Gugi Plc. is now considering whether to establish a factory in the foreign country and stop export from Nigeria to the country. The project is expected to cost F$1 billion, including F$200 million for working capital.

A suitable existing factory has been located, and production could commence immediately. A payment of F$950 million would be required immediately, with the remainder payable at the end of year one. The following additional information is available:

Details Figures
Annual production and sales 110,000 units
Unit selling price F$5,000
Unit variable cost F$2,000
Unit royalty payable to Gugi Plc ₦300
Incremental annual cash fixed costs F$50 million

Assume that the above cash items will remain constant throughout the expected life of the project of 4 years. At the end of year 4, it is estimated that the net realizable value of the non-current assets will be F$1.40 billion.

It is the policy of the company to remit the maximum funds possible to the parent (i.e., Gugi Plc.) at the end of each year. Assume that there are no legal complications to prevent this.

If the new factory is set up and export to the foreign country is stopped, it is expected that new export markets of a similar worth in North Africa could replace the existing exports. Production in Nigeria is at full capacity, and there are no plans for further capacity expansion.

Tax on the company’s profits is at a rate of 40% in both countries, payable one year in arrears. A double taxation agreement exists between Nigeria and the foreign country, and no double taxation is expected to arise. No withholding tax is levied on royalties payable from the foreign country to Nigeria.

Tax-allowable “depreciation” is at a rate of 25% on a straight-line basis on all non-current assets.

The Directors of Gugi Plc. believe that the appropriate risk-adjusted cost of capital of the project is 13%.

Annual inflation rates in Nigeria and the foreign country are currently 5.6% and 10%, respectively. These rates are expected to remain constant in the foreseeable future. The current spot exchange rate is F$1.60 = ₦1. You may assume that the exchange rate reflects the purchasing power parity theorem.

Required:

(a) Evaluate the proposed investment from the viewpoint of Gugi Plc.
Notes:

  • Show all workings and calculations to the nearest million.
  • State all reasonable assumptions. (18 Marks)

(b) State two further information and analysis that might be useful in evaluating this project. (2 Marks)

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ATAX – Nov 2020 – Q4 – Taxation of Companies

Write a report on Nigerian tax incentives and their objectives for a Mexican investor planning to explore the Nigerian market.

The quest by various governments in Nigeria since the 1990s to use tax incentives to change the narrative of being a mono-product foreign exchange earner has attracted interests from both local and foreign investors to the hitherto forgotten non-oil sector. However, some of the foreign investors are not conversant with these tax incentives available to investors in the manufacturing, mining, and telecommunication industries.

You have been appointed as a tax consultant to a Mexican billionaire through his agent in Nigeria, IBK Associates, with interests in many sectors such as agriculture, aviation, manufacturing, and telecommunication in the Latin American region. He intends to explore the Nigerian business environment within the next six months.

Required:
You are to write a report to the Mexican through his agent in Nigeria highlighting the following areas:
a. Objectives of Nigerian tax incentives (4 Marks)
b. Forms of tax incentives (2 Marks)
c. Various tax incentives available to operators in the:
i. Manufacturing sector (6 Marks)
ii. Agriculture (2 Marks)
iii. Telecommunications (2 Marks)
d. Other non-tax factors foreign investors consider in determining a jurisdiction as an investment destination (4 Marks)

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ATAX – Nov 2018 – L3 – Q4a – Tax Incentives and Reliefs

Explanation of Foreign Direct Investment and incentives for foreign investors in Nigeria.

(a) Write a short note on Foreign Direct Investment (FDI) and incentives available to foreign investors in Nigeria.

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TAX – May 2023 – L2 – SC – Q7 – Tax Incentives and Reliefs

Explain tax incentives and penalties for enterprises in export processing zones.

The Federal Government in a bid to further boost the growth in foreign exchange earnings, create new jobs, facilitate economic diversification, industrialization, and provide access to foreign technology, came up with its export processing zones (EPZs) policy.

EPZ is regarded as a customs area where an enterprise is allowed to import plant, machinery, equipment, and raw materials, process them, and then export them to the world market, under security and without paying duty.

To facilitate a better understanding of the above assertions, the Managing Director of a would-be client approached you for explanations of the relevant provisions of the Nigerian Export Processing Zones Act Cap. N107 LFN 2004 (as amended) and Companies Income Tax Act Cap. C21 LFN 2004 (as amended).

Required:

a. Discuss SIX special tax incentives for enterprises operating in an export processing zone. (12 Marks)

b. Explain the penalties for non-compliance with section 55(1) of CITA (as amended). (3 Marks)

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SCS – MAR 2024 – L3 – Q5c – International financial management

Evaluate the factors restricting foreign investment despite potential good returns.

With reference to Option Three, evaluate the factors that restrict foreign investment despite the perceived potential for good returns. 

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AFM – Nov 2018 – L3 – Q1b – Economic environment for multinational organisations

Advising One-Village on the risks associated with a proposed irrigation project in a Sub-Saharan African country based on the World Bank Doing Business Report.

The directors of One-Village are considering another irrigation project in a country in Sub-Saharan Africa. The World Bank’s Doing Business Report for 2017 ranked the destination country 140th out of 190 countries on the ease of doing business. Below is the ease of doing business statistics for the destination country and One-Village’s home country as reported in the Doing Business 2017 report.


Required:
Advise the directors on four risks or issues One-Village should consider when deciding on whether to implement the proposed irrigation project in the destination country, and suggest how the risks or issues may be mitigated or resolved.
(8 marks for risks and mitigation)

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AT – May 2021 – L3 – Q3a – International Taxation

Explain how foreigners should participate in business activities in Ghana under the GIPC Act, 2013 (Act 865).

Ghana Investment Promotion Centre (GIPC) is a governmental agency established to promote, co-ordinate, and facilitate investment in Ghana. In its efforts at promoting both local and foreign investments in Ghana, it has mounted a series of lectures to drum home this fact and has done so well over the years in this regard.

Required:
In line with the GIPC Act, 2013 (Act 865), how should foreigners participate in business activities in Ghana?

Login or create a free account to see answers

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AT – MAR 2024 – L3 – Q5b – Tax Administration in Ghana

Discusses the restrictions on foreign business activities and the tax benefits of sole proprietorship versus limited liability companies.

You are an external consultant to the Ministry of Trade and Industry. The Minister has received a delegation of both foreigners and Ghanaians to deliberate on investment opportunities available in Ghana.

Required:
i) Business activities that cannot be engaged in by foreigners. (5 marks)
ii) The tax benefits of establishing a sole proprietorship business as against a limited liability company. (5 marks)

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AT – Nov 2023 – L3 – Q1a – Tax administration in Ghana

Discuss three ways a foreigner may participate in business activities in Ghana under the GIPC Act.

Ghana has a lot of opportunities for both local and foreign investors. The Ghana Investment Promotion Centre has demonstrated in many ways the policy consideration behind the promotion of investment to both Ghanaians and foreigners.

Foreigners must meet certain basic conditions before they are permitted to undertake business activities in Ghana.

Required:
Discuss THREE (3) ways a foreigner may participate in business activities in Ghana.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.