I need to submit a project report that describes & evaluates three project alternatives using the project evaluation techniques. Assume writing a proposal to Board of Directors
My analysis should include estimates of projected costs of production and use Discounted Cash Flow analysis, using a justified” Internal rate of return” to give a Net present Value of 3 alternatives of a capital investment project.
The procedures to be followed are:
a) Prepare a clear definition of the objective of the project and, where practicable, this should be related to the current strategies of the organisation.
b) The formulation of options to achieve (e.g set up a manufacuring plant at locations in countries A,B & C). Three investment alternatives should be compared.
c) A formulation of the detailed costs and benefits of the options.
d) Calculate the cost of capital (debt/ equity)
e) Evaluation of the Earned Value Management
f) Evaluation of the Accounting Rate of Return (ARR = Average Annual Profit/Average investment to earn that profit x 100%)
g) Calculation of the NPV of each option using D.C.F techniques (Use a minimum period of 10 years and justify the discount rate used.
h) Evaluation of the risks of the project.
i) Weighted Average Cost of Capital (WACC)
j) Recommendation of the most economic option and discussion of any non-financial factors relevant to my decision.
The assignment report should be brief and to the point. The aim is to demonstrate understanding of the operating and capital budgets from a practising manager’s point of view .
The following format to be in my report:
· Executive summary
· Table of contents
· Introduction (not more than one page for introducing the project)
· Discussions of options
· Cost of capital assumptions and calculations (debt/ equity costs)
· Description of the costs and benefits of the project
· Evaluation of the project – eg. DCF comparisons to give NPV
· Evaluation of the risk of the project
· Recommendations
· Biography
Basis guide on the marking criteria:
· Description of Project – 10%
· Cost and Benefits– 20%
· Basis for selecting the IRR – 10%
· Evaluation of project e.g DCF – 20%
· Evaluation of risks – 10%
· Recommendations – 10%
· Readability and biography – 10%
· Presentation of the report: Executive Summary, Conclusion, tables, etc – 10%
Assumption Company Info:
Beverage Trading Pte Ltd
New Product: Flower Tea
EXECUTIVE SUMMARY
The history of tea is as long and storied as the history of China itself. One legend states that early emperor Shen Nong required all drinking water be boiled. While travelling to a distant part of his realm, some dried leaves from a bush fell into the water his servants were boiling for him. Shen Nong, a creative scientist, was intrigued by the brown liquid. He took a drink, found himself refreshed, and thus, legend goes, created tea.
Blooming tea was created in the recent 20 years mainly the two provinces of China, Fujian and Yunnan. It soon gains popularity in Hong Kong, Shanghai, Taiwan, Thailand, Japan, etc. It is also fast becoming a fashionable trend even in European countries.
Blooming tea is made by binding needle-like, green or white jasmine tea into various shapes around different flowers. This delicate technique requires skilled hands, combining art with tea making. When brewed, the bound piece slowly opens releasing the sweet smell of jasmine and the hidden flowers. Fully opened, a spectacular shape is revealed with the tea leaves and flowers wafting graciously.
There are splendid varieties of different teas for the blooming tea lover, and makes an impressive gift. The blooming teas are 100% natural tea and flowers and are suitable for drinkers of all ages
I would like to introduce “Blooming Tea” to create a whole new innovative experience in tea drinking by not just allowing the master tea-makers to display their skills, they also honour longstanding tea customs and traditions. The end result is a visually appealing, flavourful tea worthy of the finest courts.
INTRODUCTION
Since 2006, specialty tea saw the most dynamic growth in the tea sector, due to its novelty and its wide array of flavours.(Executive Summary from “Tea in Singapore” by Euromonitor International).
It attracts consumption demand from the increasing numbers of health-conscious and younger consumers respectively; and this market trend will keep going stronger. Therefore there is very good prospect to introduce Blooming Tea to the market. Singapore is a cosmopolitan country which is susceptible to accept and try new captivating product. Therefore Blooming Tea brings in a new drinking experience.
So in order to market the product, there are 3 alternative plans to expand our new business:-
Setup a retail outlet at high end shopping mall.
· Target Audiences - Upper class buyer
· Benefits – Brands awareness & increase the product status
Setup a retail outlet at neighbourhood shopping mall.
· Target Audiences - Middle class buyer
· Benefits – Good products exposure to family audiences & high human flow
Setup retail outlet at 2 locations – 1 x high end shopping mall & 1x neighbourhood shopping mall.
· Target Audiences – Upper class & Middle class buyer
· Benefits – Able to market more audiences and provide better brand awareness to different level buyer
INFORMATION OF SHOPPING MALL RENTAL CHARGES (ASSUMPTION)
Rental Cost at High end Shopping Mall:
· 800sqft
· 10,000 per mth
· Initial 3 months rental payment
· 1 month deposit
· 2 + 1 year leasing
Rental Cost at Neighbourhood Shopping Mall
· 700sqft
· 6,000 per mth
· Initial 2 months rental payment
· 1 month deposit
· 3 + 1 years leasing
Finance assumption (You can come out your own finance assumption if necessary):
Balance Sheet 2008
Current Asset
-
Bank - 350,000
-
Trade debtors - 300,000
-
Inventory at cost - 450,000
1,100,000
Non-current asset
-
Fixtures and fitting at cost - 200,000
-
Less accumulated depreciation - 100,000
100,000
Total Assets - 1,200,000
Current Liabilities
· Trade creditors - 300,000
· Income tax - 50,000
350,000
_________________________________________________________________________
PS: You may create or change the above assumption if require. I hope the above able to provide better understanding of the assignment. Thank you
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