A U.S. based high tech company has built a R&D office in Bangalore, India. Four years have passed since
the greenfield operation was successfully built. During this time, the new location has taken on higher
priority engineering projects and has trained and developed managerial skills of its newly recruited
managers in Bangalore.
Headquarters wants the office to take on a new engineering project that would expand its business in the
U.S. by adding a new product line. This project has been identified as the most important objective for the
corporation in the mid-term. The project is still in the phase of identifying specifications and developing
milestones, where the engineering management ream is working closely with the product manager. The
management team understands that it must create an international assignment program to have this
project run smoothly. The team believes that extended business travel would be the most appropriate
program.
In order to confirm their belief, the HR manager does extensive research. The analysis shows that
extended business travel will result in $10,000,000 addition revenue in the first year and $5,000,000
additional revenue in the second year due to the customization of the product to customer demand. The
cost of the program is $400,000 initial investment plus a variable cost of $100,000 per year. What is the
return on investment in the first year ?