A coffee company based in Malaysia is considering investing in the coffee manufacturing facility in two overseas markets
Posted: Thu Apr 28, 2022 10:59 am
A coffee company based in Malaysia is considering investing in
the coffee manufacturing facility in two overseas markets: (1) the
Philippines and (2) Indonesia. According to the report for both
projects, the board of Directors is deciding which overseas markets
they should invest in, so the company feasibility study officer
should provide a thorough report for both locations. The project is
mutually exclusive.
The first manufacturing facility will be located in the
Philippines.
The initial investment in the project is $60,000,000 and the
project is expected to have a lifetime of 15 years. The expected
revenue is $ 26,000,000 per annum and is expected to grow at 5%
every 3 years. The expected cost is $19,500,000 per annum and is
expected to grow at 4% every 3 years.
The second manufacturing facility will be located in
Indonesia.
The initial cost of this project is estimated at $40,000,000.
This project is expected to last for 15 years and generate an
income of $22,000,000 per year for the first six years and from the
seventh year onwards it increases $750,000 per year until the end
of its lifetime and the cost is $16,000,000 per annum and also will
increase the same as income.
The discount rate for both initiatives is 7.5%.
Requirements:
Use the appropriate method(s) to evaluate both projects and
select your preferred project
the coffee manufacturing facility in two overseas markets: (1) the
Philippines and (2) Indonesia. According to the report for both
projects, the board of Directors is deciding which overseas markets
they should invest in, so the company feasibility study officer
should provide a thorough report for both locations. The project is
mutually exclusive.
The first manufacturing facility will be located in the
Philippines.
The initial investment in the project is $60,000,000 and the
project is expected to have a lifetime of 15 years. The expected
revenue is $ 26,000,000 per annum and is expected to grow at 5%
every 3 years. The expected cost is $19,500,000 per annum and is
expected to grow at 4% every 3 years.
The second manufacturing facility will be located in
Indonesia.
The initial cost of this project is estimated at $40,000,000.
This project is expected to last for 15 years and generate an
income of $22,000,000 per year for the first six years and from the
seventh year onwards it increases $750,000 per year until the end
of its lifetime and the cost is $16,000,000 per annum and also will
increase the same as income.
The discount rate for both initiatives is 7.5%.
Requirements:
Use the appropriate method(s) to evaluate both projects and
select your preferred project