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Assignment:
Company Project info
Course: F-303
(Capital Investment Decision)
The company is inspecting the feasibility of the project with the objective of increasing
additional profit by 11% additionally. Also, through exploratory conversation it is
expected that through building additional capacity by project establishment the
company will be able to generate additional revenue Tk. 150 crore. It is seen that the
market has a good potential growth of demand in both locally and globally for which it
will bring additional revenue as follows
It is estimated that the project will require a working capital which is 85% at average
of sales. The variable cost for per ton capacity utilized is estimated to be Tk. 27500
with fixed cost increase by Tk. 2.6 crore. The estimation says that about 80% of the
new capacity will be utilized in the first two years were the utilization will stand as 90%
for the next four years and 100% utilization for the rest of the years.
The project cost is as follows: Land and land Development TK 80 crore and necessary
machinery and equipment cost Tk. 420 crore with an 8-year economic life. The
company follows straight line method of depreciation. The relevant tax rate is 40%.
The company intends to finance this project through offering right share to at 20 per
with Tk. 10 premium included to accumulate Tk. 300 crore and remaining fund at 12%
loan from bank. The current market price of its share is Tk. 26.80 per and paid dividend
Tk. 0.80 per share.