Corporate Finance
Instructor: To Thi Thuy Duong
GROUP ASSIGNMENT
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Group Assignment
Group Members:
Qu n ng – BA60123
Lê Qu n ếu
– BA60114
uỳnh Duy Thôn – BA60130
Khưu M nh Trườn – BA60080
N uyễn ữu Phước – BA60120
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Table of Content
Survey………..P.3
Introduction about company………..P.8
Introduction about product……….P.9
Company’s SWOT analysis………P.11
Company’s Visibility………..P.11
Workforce structure………..P.12
Marketing strategy……….P.13
Finance……….P.14
Conclusion……….P.21
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We can know that before starting every project for business, the business man have to research the demand of market. Thanks to this activity, we can know the demand of customer. This helps us have the right decision. Therefore, firstly our group will give the survey that we made on the internet to demonstrate that our project can meet the demand of market.
Survey
Survey had done with random and 35 people from 15-55 in aged. Results obtained are:
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One more thing important that is price of product. According survey we get, amount of money people spent for buy sport clothes from 100,000 VND to 300,000 VND accounted percentage the highest. So from that, the price of our products are reasonable
.
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Secondly, we move to the main content of project. It includes 6 parts: Introduction about company, introduction about comp ny’s product, comp ny’s SWOT analysis, the visibility of company, workforce structure and marketing strategy.
Introduction about company
_ Name: Viclody_ Logo of company:
_ Location: Nguyen Anh Thu street, Tan Thoi Hiep Industrial Park, District 12. _ Area: 1000 m2
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The factory that we plan to rent for our company
Introduction about product
Our main product is sport clothing with two main line products:Corporate Finance
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_ Sport clothing made from shiny fabrics: wear cool, comfortable, less ability to absorb sweat, non-stretch elastic, low price.
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Company’s SWOT analysis
Strength Weaknesses Opportunities Threats
Employees have high-skilled
Could care very attentive to customers, with the level of work have not too much, we have a lot of time to care about customers
Easy to change quickly and flexibly of the marketing strategy are ineffective.
The company is the newcomer and has not experience in garment industry.
Fashion design possibilities are limited
Technical equipment level is low compared to some countries in the region
Our business is expanding with the potential to lead to higher success
Customer needs are great
New products with domestic brand name.
Large fluctuations of the economy in the
domestic and the world.
Compete with big competitor
Company’s Visibility
Our visibility includes two stages of development:
_ First stage: We will to enter into the market. We try our build up our credibility through our product which has good quality and reasonable price. Thanks to th t, we w ll h ve the sol d pos t on n V etn m’s garment market. This stage can last about 2 years.
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Workforce structure
The workforce structure of our company includes:
A director has the responsible that manages human resources and supervises all activities and operations of company.
A deputy director has the responsible that manages financial problem and support the director to superv se comp ny’s ct vities.
Product Division includes 5 workers: one manager and two high-ranking officials. They have the responsible that do marketing, sales, receive and control order of customer and design product model and style.
Material Division includes 5 workers that have the responsible to buy, select and classify material.
Manufacturer Division includes 3 parts:
Cutting part: 5 worker use 5 cutter-machines
Making clothes part: 40 workers.
Finishing product part: 5 workers who print the logo or packing product. Logistic Division: 3 workers do customer service and 2 security guards.
Position
Salary (VND)/a month
1 Director
10,000,000
1 Deputy director
8,000,000
65 workers
65 * 3,000,000
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Marketing strategy
Marketing is one of the important element make business plan success or failure. We are new comer in rment ndustry so we need use m rket n str te es ppropr tely to n m rket nd consumer’s m nd. Our marketing strategies divide two stages.
_ Stage 1: Building company and network customers.
Use our website to advertisement our products, in website customers can find information about products, price, distributions.
Use leaflet to help customer know clearly about our product.
Use social network such as; facebook, zingme, youtube to reinforce network partner and customer everywhere.
Keep compete price to create competitive advantage.
Focus on location hasplay grounds, stadiums, schools.
Do survey online or survey offline to get opinion customers in market. Stage 2: Expanding market, enhancing advertise brand name.
Expanding market in near province such as; Binh Duong, Dong Nai, Vung Tau, in those here also have strong consumption.
Expanding line products.
Us n med commun c t on to dvert sement, such s; TV, newsp per, r d o,…
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Finance
1/ Start-up expense (Unit: VND)
Equipment Number Cost
Sewing-machine 40 360,000,000
Overcasting-machine 5 32,500,000
Cutter-machine 5 30,000,000
Deposit on factory 1 240,000,000
Machine for administration 63,000,000
Van 1 1,000,000,000
Total 1,715,500,000
With every business plan, before doing it, we have to forecast about the start-up expense. In our business idea, we predict that we need total 1,715,500,000 VND to start up. This initial are used to buy equipment and it includes:
- Sewing-machine: 40 workers will use 40 sewing-machines that cost 9,000,000 VND for 1 machine. Therefore, total cost to buy sewing machine is 360,000,000 VND.
- Overcasting-machine: 5 workers will use 5 overcasting-machines that cost 6,500,000 VND for 1 machine. Therefore, total cost to buy overcasting-machine is 32,500,000 VND
- Cutter-machine: 5 workers will use 5 cutter-machines that cost 6,000,000 VND for 1 machine. Therefore, total cost to buy cutter-machine is 30,000,000 VND
- Deposit on factory: we need a infrastructure to set up our factory. As we talked above, we have chosen one in District 12 with the payment monthly cost is 20,000,000 VND. In order to deposit on this infrastructure, we have to pay 240,000,000 VND, equivalent to 12 month payment cost.
- Machine for Administration: they are the tools use for administration in company. They include 6 phones (500,000 VND for one) and 6 PC (10,000,000 VND for one). Total administrative cost is 63,000,000 VND.
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2/ Depreciation (Straight line method) (Unit VND)
Equipment Cost Usage period Depreciation per year
Sewing-machine 360,000,000 10 36,000,000
Overcasting-machine 32,500,000 10 3,250,000
Cutter-machine 30,000,000 10 3,000,000
Machine for
administration 63,000,000 10 6,300,000
Van 1,000,000,000 20 50,000,000
Total 148,550,000
3/ Depreciation calculation in 5 years (Unit: VND)
Year 1 Year 2 Year 3 Year 4 Year 5
Beginning
book value 1,475,000,000 1,326,950,000 1,178,410,000 1,029,850,000 881,300,000 Straight line 148,500,000 148,500,000 148,500,000 148,500,000 148,500,000
Ending book
value 1,326,950,000 1,178,400,000 1,029,850,000 881,300,000 732,750,000
4/ Fixed cash outflow (Unit: VND)
Year 1 Year 2 Year 3 Year 4 Year 5
Renting
factory 240,000,000 240,000,000 240,000,000 240,000,000 240,000,000 Salary
payment 2,556,000,000 2,556,000,000 2,556,000,000 3,005,900,000 3,005,900,000 Advertising 30,000,000 35,280,000 41,500,000 48,800,000 57,400,000
Electricity
and Internet 36,000,000 44,400,000 54,700,000 67,400,000 83,000,000 Other 30,000,000 35,280,000 41,500,000 48,800,000 57,400,000
Total 2,892,000,000 2,910,000,000 2,943,000,000 3,410,900,000 3,443,700,000
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5/ Cost of goods sold in the first year (Unit: VND)
Expense Cost
Raw material 2,300,000,000
Print in product 100,000,000
Packing 30,000,000
Salary payment 1,980,000,000
Total 4,410,000,000
The total cost of goods sold in the first year is 4,410,000,000 VND. It includes:
- Raw material: As we talked above, the two main product of company is sport clothes that are made from cold fabrics and shiny fabrics. Therefore, raw material is cold fabric (60,000 VND for 1 kg fabric) and shiny fabric (40,000 VND for 1 kg fabric). With the number of workers and equipment that we have, we predict that every day, company can manufacture at least 300 products. And with 1 kg raw material, we can make 2.5 unit products. Therefore, every day we need at least 120 kg fabric. In order to have back up, we will buy 130 kg materials a day with 65 kg cold fabrics and 65 kg shiny fabrics. To sum up, in the first year we have to spend 1,400,000,000 VND for cold fabric and 900,000,000 VND for shiny fabric. Total cost for raw material in the first year is 2,300,000,000 VND.
- Print in product and Packing: They are the cost for complete the manufacturer of product. - Salary payment: This payment will be counted on the workers who directly make the product.
They are 5 workers in Material Division and 50 workers in Manufacturer Division. Their salary is 3,000,000 VND monthly per one so the total salary payment in 1 year is 1,980,000,000 VND.
6/ Net sales in the first year (Unit: VND)
Product from Cold fabric Product from Shiny fabric
Number product that can be sale 49,275 49,275
Price for a product 80,000 60,000
Net sales 3,942,000,000 2,956,500,000
Total net sales 6,898,500,000
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7/ Loan needed calculation (Unit: VND)
Owner equity 2,764,500,000
Start-up expense 1,715,500,000
Fixed cash outflow in first year 2,892,000,000
Capital 4,607,500,000
Cash needed 1,843,000,000
As can be seen from the table above, the capital we need in initial is 4,607,500,000. At moment, we have 2,764,500,000 VND, taking of 60% in the cash outflow that we need. It means we lack of 1,843,000,000. In order to start this business plan, we decided to borrow 1,843,000,000 (making up 40% in the capital) with interest 12% (about 221,600,000 VND per year) from Eximbank.
8/ Net sales forecast (Unit: VND)
Year 1 Year 2 Year 3 Year 4 Year 5
Growth rate - 5% 10% 10% 15%
Net sales 6,898,500,000 7,243,430,000 7,967,770,000 8,764,550,000 10,079,230,000
As the comp ny’s v s b l ty th t we t lked bove, n the be nn n per od, we try to m ke sol d pos t on in the market so from the first year to the second year, we forecast that our net sales only increase 5%. However, from the third year, we are confidence that we can take up the market, drive back and replace the product in China. So in the third year and fourth year, our net sales can increase 10% per year. In the fifth year, net sales will rise 15%.
9/ Cost of goods sold forecast (Unit: VND)
Year 1 Year 2 Year 3 Year 4 Year 5
Raw material, print in product, packing
2,430,000,000 2,551,500,000 2,806,000,000 3,087,320,000 3,550,420,000
Salary payment 1,980,000,000 1,980,000,000 1,980,000,000 1,980,000,000 1,980,000,000
Total 4,410,000,000 4,531,500,000 4,786,650,000 5,415,820,000 5,878,920,000
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10/ Income statement forecast (Unit: VND)
INCOME STATEMENT UNIT: VND
Year 1 Year 2 Year 3 Year 4 Year 5
Net sales 6,898,500,000 7,243,430,000 7,967,770,000 8,764,550,000 10,079,230,000
Cost of goods sold 4,410,000,000 4,531,500,000 4,786,650,000 5,415,820,000 5,878,920,000
Selling and
administrative expense
912,000,000 930,460,000 953,700,000 1,082,380,000 1,115,180,000
EBITDA 1,567,500,000 1,780,970,000 2,227,420,000 2,266,350,000 3,085,130,000
D & A 148,500,000 148,500,000 148,500,000 148,500,000 148,500,000
EBIT 1,427,950,000 1,632,420,000 2,078,870,000 2,117,800,000 2,963,580,000
Interest expense 221,600,000 221,600,000 221,600,000 221,600,000 221,600,000
EBT 1,206,350,000 1,410,820,000 1,857,270,000 1,896,200,000 2,714,980,000
Taxes (25%) 301,590,000 352,710,000 464,320,000 474,050,000 678,750,000
Net income 904,760,000 1,058,110,000 1,392,950,000 1,422,150,000 2,036,230,000
Selling and administrative expense is the cost for selling and company administration. A big amount of salary payment are counted on Cost of goods sold so the remained salary with another fixed cost will be counted on Selling and Administrative expense.
The development of Net sales and Net income (Unit: thousand VND)
0 2000 4000 6000 8000 10000 12000
Year 1 Year 2 Year 3 Year 4 Year 5
Net sales
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11/ Operating expense cash flow (Unit: VND)
Year 1 Year 2 Year 3 Year 4 Year 5
Raw material, print on product,
packing
2,430,000,000 2,551,500,000 2,806,650,000 3,087,320,000 3,550,420,000
Renting factory 240,000,000 240,000,000 240,000,000 240,000,000 240,000,000
Salary payment 2,556,000,000 2,556,000,000 2,556,000,000 3,005,900,000 3,005,900,000
Advertising 30,000,000 35,280,000 41,500,000 48,800,000 57,400,000
Electricity and
Internet 36,000,000 44,400,000 54,700,000 67,400,000 83,000,000 Other 30,000,000 35,280,000 41,500,000 48,800,000 57,400,000
Total 5,322,000,000 5,322,000,000 5,740,650,000 6,496,220,000 6,994,120,000
12/ Cash flow (Unit: VND)
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 6,898,000,000 7,243,430,000 7,967,770,000 8,764,550,000 10,079,230,000
- Op Ex 5,322,000,000 5,322,000,000 5,740,650,000 6,496,220,000 6,994,120,000
EBITDA 1,567,500,000 1,780,970,000 2,227,420,000 2,266,350,000 3,085,130,000
-D&A 148,500,000 148,500,000 148,500,000 148,500,000 148,500,000
EBIT 1,427,950,000 1,632,420,000 2,078,870,000 2,117,800,000 2,963,580,000
X (1-t) 0.75 0.75 0.75 0.75 0.75
NOPAT 1,070,962,500 1,224,315,000 1,559,152,500 1,588,350,000 2,222,685,000
+D&A 148,500,000 148,500,000 148,500,000 148,500,000 148,500,000
CF Opns 1,219,462,500 1,372,815,000 1,707,652,000 1,736,850,000 2,371,185,000
-Cap
Exp 3,318,000,000 0 0 0 0 -553,250,000
-Add
WC 5,322,000,000 0 0 0 0 -5,322,000,000
FCF -8,640,000,000 1,219,462,500 1,372,815,000 1,707,652,000 1,736,850,000 8,246,435,000
Capital expense is the total of Beginning book value (1,475,000,000 VND) and loan from Eximbank (1,843,000,000 VND). It is 3,318,000,000 VND. In the fifth year, capital expense is , it means our company will receive .This amount is calculated by:
Ending book value in the fifth year – Taxes + (25% x Beginning book value) = 549,562,500 - 3,687,500
= 553,250,000 VND
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interest is 8% every year. So the opportunities cost of the money that we are having is 8% of 2,764,500,000 VND.
Therefore, we can calculate the cost of capital:
0.6 X 0.08 + 0.4 X 0.12 = 0.096
So the cost of capital is 9.6%.
We can calculate the Net present value, IRR and DPB in five year of this business plan:
Net present value 1,330,800,164
IRR 13.82
NFV 2,104,580,860
PB 4.32
DPB 4.74
MIRR 15.51
Net present value in the next 5 years is 1,330,800,164 VND and IRR is 13.82 with the Discounted Payback period is 4.74 years. It means this business plan can be accepted although the time to recover the capital is a little long.
13/ Return on Assets and Return on Equity in the first year
Assets 4,607,500,000
Liabilities 1,843,000,000
Equity 2,764,500,000
Net income 904,760,000
ROA 19.64%
ROE 32.73%
In order to have the objective viewpoint about the Ratios of our company, we will compare the ROE of our company with it of North Garment Joint-stock company (TET) and Industrial (Garment industry).
Our company TET Industrial
ROA 19.64% 9%
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Through this table, we can recognize that the ROE of our company is lower than TET. However, ROA and ROE are higher so much than the ratios of industrial. It means that the ability to use equity and asset to make profit of our company is quite good and better than almost company in the same industry.
Conclusion
To sum up, we will show some advantages and disadvantages when investing in our company and business plan:
ADVANTAGES DISADVANTAGES
NPV is positive that means company can earn profit and this plan can be accepted.
Waste a long time to recover the capital
IRR is medium, not low that means the return of company is acceptable.
ROA is higher than its Industrial that means company use Assets effectively.
ROE is higher than its Industrial that means company use Equity effectively.
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REFERENCES
Fundamentals of Corporate Finance, Second Edition, Robert Parrino-David
S.Kidwell-Thomas W.Kenbates, John Willey & Sons Inc
http://www.cophieu68.com/
http://www.cophieu68.com/snapshot.php?id=TET
Thanks for your reading