INVESTMENT PROJECT ANALYSIS OF A PACKAGED FRESH CAKE MANUEACTURER

TR NG IH CM TP HCM UNIVERSITÉ LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MBAVB4 NGUYEN NGOC HONG INVESTMENT PROJECT ANALYSIS OF A PACKAGED FRESH CAKE MANUFACTURER MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION (PART-TIME) Tutor’s Name: Dr NGUYEN MINH HA Ho Chi Minh City (2011) i ACKNOWLEDGMENT I extent my thanks for all professors taking part in Vietnam Belgium master program who are doing full of meaning jobs to open opportunities for me to approach a new different education Each lesson is a granted valuable gift which is always behind me during my life and career path I would like especially thank to my tutor Mr Nguyen Minh Ha for his help during period of doing thesis I am appreciate his devoted and meticulous comments on my written paper from the commencement There is no doubt that without his help, I would not finish this paper I owe the debt of gratitude to my parents, brother and sister who always support me by their own way and encourage me so much during the two year MBA course They make me feel a peaceful living to pursue my studying target for a better future Finally, I wish to thank my MBAVB4 friends who are willing to give the class their supports which are derived from their kindness in a collective studying team I am also thank to friends in my studying group who have spend their time with me to debate issues, search materials or patiently re-guide me lessons Without all these kindness of life, I would not be as I am today Thank you ii COMMITMENT Hereby I, Nguyen Ngoc Hong, commit that this final thesis is my own work No part of this thesis has previously been submitted to any place by any means In consideration of confidential business opportunity, I confirm that this project is for my final thesis only iv EXECUTIVE SUMMARY Since Vietnam joined the World Trade Organization (2007), the economy of country has improved, which has led to rising disposable household incomes and continuous improvements in living standards Therefore, Vietnamese consumers are now able to take better care of their health and well-being In addition, the means of communications feature health-oriented articles and programmers that are regularly broadcast encouraging Vietnamese people to pay more attention to their health in order to live happily as well improve life expectation For these reasons, the health and wellness trend continued to grow strongly in Vietnam throughout the review period, especially in large cities such as Ho Chi Minh, Ha Noi and Da Nang On the social sight, the consuming expenditure has ever increased promptly as not ever been before The expenditure habit is gradually changed due to higher standard living from higher income It is also required products being suitable with life style which carry out characteristics of convenience and easy for using Food processing industry is not out of modern tendency Packaged food products are seem to become booming of demand Although it is a traditional market where famous brand name are existing, there is still opportunities for new comers entering the market with its innovation and differentiation The changing in demand of food processing industry is on the sight of a group local investors The idea of implementation of project is executive in which catching the new consuming trend by supplying top qualify, delicious and freshness packaged cakes that satisfy convenience and healthy required from consumers And, the project is being considered to building a factory for production to exploit the local market The idea is from analyzing demand, supply, competitive and new consuming trend in term of market size, growth and differentiation of products It is discovered a new market segment to products served for health and wellness of consumers From the overall outlook, the production capacity will be calculated for further investment consideration When investing in long term assets, many aspects are also considered such as location of the factory, life time estimation or production machine system And finally, financial figures are used to measure the efficiency of the project Risk analysis is carefully considered in the project under impact of one and two variables senario as well as simulation analysis to find out sensitive factors to the result for effective management The aspect of operation and v production management is also mentioned as inventory, organization structure, human resource, the cost of goods sold and working capital requirement The final purpose of all analysis is to rightly assessment the project and well management its performance after investment decision By the end of analysis, the investor should be able to see the possibility and profitability of this project that are used for further investment decision For this project, it has financial indicators as positive NPV and IRR greater than return on equity It is supported by others such as MIRR greater than return on equity, PI greater than 1, less than the life of project to payback period of years months and discounted payback period of years months and ADSDR greater than Based on these indicators, the project is feasibility and the expected profitable return of investors is satisfied Moreover, the simulation analysis method figures 68.75% probability for NPV > Therefore,the investor should implement the project However, the investor should pay their attention on four sensitive factors as unit price, productivity, raw material and sales cost for well management the performance In which, unit price is much more considered than others due to 72.3% contributed to variance view Moreover, during the project on operation, the investor should be caution on controlling modern technology, spreading brand name and persuading distributors by sales cost strategy In conclusion, the next detail action plans after investment must be considerate carefully to ensure a effective project vi Table of contents ACKNOWLEDGMENT i COMMITMENT ii TUTOR’S COMMENTS iii EXECUTIVE SUMMARY iv Table of contents vi List of tables x List of charts xii List of pictures xiii ACRONYMS xiv CHAPTER I: INTRODUCTION .1 1.1 PROBLEM STATEMENT .1 1.2 OBJECTIVE OF THE STUDY .2 1.3 SCOPE OF STUDY .3 1.4 METHOD AND DATA OF STUDY .3 1.5 SIGNIFICANCE OF THIS STUDY .3 1.6 THE STUDY STRUCTURE CHAPTER II: OVERVIEW OF INVESTORS AND THE PROJECT 2.1 THE OVERVIEW TO INVESTORS .5 2.2 THE OVERVIEW OF THE PROJECT 2.2.1 General information about the project 2.2.2 Introduction about products of the project 2.2.3 Introduction about the location of the project CHAPTER III: THE MARKET ANALYSIS 11 3.1 OVERVIEW ABOUT INDUSTRY AND CAKE SEGMENT 11 3.1.1 General overview about macro-economics 11 3.1.2 The introduction about Packaged food industry .12 3.1.3 The introduction about Packaged Cake segment 15 3.2 DEMAND MARKET OF PACKAGED CAKE SEGMENT 15 3.2.1 The existing market size of Packaged Cake segment .15 3.2.2 The forecasting market size of Packaged Cake segment 17 vii 3.2.3 The demand characteristics of Packaged Cake segment .18 3.3 SUPPLY MARKET OF PACKAGED CAKE SEGMENT 19 3.3.1 Classification of competitive groups of the product .19 3.3.2 Classification of price to competitive products 22 3.3.3 The main players in existing market .23 3.3.4 The competitive landscape 26 3.4 ENTERING INTO THE MARKET GAP BY CATCHING CONSUMING TREND AND DIFFERENTICATION 28 3.4.1 The consuming trend outlook 28 3.4.2 The product differentiation of project 30 3.4.3 The market opportunity to enter into new segment of product .31 3.4.4 The capacity of project 32 CHAPTER IV: THE INITIAL INVESTMENT AND TECHNICAL ANALYSIS 34 4.1 MAIN PRODUCTION MACHINE SYSTEM 34 4.1.1 Auto-Bake technology 34 4.1.2 Overview the production process 35 4.1.3 The operation mechanism of production machine system 35 4.1.4 Supplementary equipments for auto-bake main production system .38 4.1.5 Capacity of production machine system .40 4.1.6 Supporting instruments for production 41 4.2 BUILDING PRODUCTION FACTORY 41 4.2.1 Cost for land using right 41 4.2.2 Building the main factory .42 4.2.3 The costs related to construct main factory 43 4.3 ADMINISTRATIVE COSTS UNDER PROJECT CONSTRUCTION 44 4.4 DEPRECIATION PERIOD TO CATEGORIES OF INITIAL INVESTMENT 44 CHAPTER V: OPERATION AND PRODUCTION MANAGEMENT ANALYSIS 48 5.1 SALES AND MAKETING MANAGEMENT 48 5.1.1 Production capacity exploited .48 5.1.2 Inventory and consumption ratio 50 5.1.3 Forecast revenue, marketing and sales cost 52 viii 5.2 ORGANIZATION STRUCTURE 52 5.3 HUMAN RESOURCE AND ADMINISTRATIVE MANAGEMENT .53 5.4 COST OF GOODS SOLD .55 5.5 FINANCIAL STRUCTURE OF PROJECT 57 5.6 PRO-INCOME STATEMENT .58 5.7 WORKING CAPITAL REQUIREMENT .61 5.8 PRO-CASH FLOW STATEMENT .64 CHAPTER VI: PROJECT EVALUATION AND RISK ANALYSIS .66 6.1 THE EXPECTED RATE OF RETURN OF INVESTORS 66 6.1.1 Estimating the factors of CAPM base on characteristics of project .66 6.1.2 Estimating the Return on equity, Re .69 6.2 FINANCIAL ANALYSIS ON EQUITY POINT OF VIEW 69 6.3 PROJECT VALUATION CRITERIA 70 6.3.1 Net present value - NPV method 70 6.3.2 Interest Rate of Return - IRR method .70 6.3.3 Modified Internal Rate of Return – MIRR method 71 6.3.4 Profitability Index – PI method 71 6.3.5 Regular Payback – RP method .71 6.3.6 Discounted Payback – DP method 71 6.3.7 The Annual Debt Service Capacity Ratio – ADSCR method 71 6.4 THE RESULT OF PROJECT VALUATION .72 6.5 RISK ANALYSIS 72 6.5.1 Sensitivity analysis under impacted one variable 72 6.5.2 Sensitivity analysis under impacted two variables 77 6.5.3 Scenario analysis 81 6.5.4 Simulation analysis 82 6.6 THE IMPACT OF A DEBT STRUCTURE 84 6.7 PROJECT VALUATION UNDER INFLATION ENVIROMENT .85 CHAPTER VII: CONCLUSION AND RECOMMENDATION 89 7.1 CONCLUSION 89 7.2 RECOMMENDATION 90 ix REFERENCES 91 APPENDIX 1: AUTO-BAKE PROCESS AND TECHNOLOGY OVERVIEW .94 APPENDIX 2: BUILDING MATERIAL STANDARDS FOR FACTORY 106 APPENDIX 3: INTRODUCTION ABOUT BID TENDERS 109 APPENDIX 4: CALCULATION RATE OF RETURN (Re) BY CAPM METHOD APPROACH 112 APPENDIX 5: FINANCIAL MODEL WITH REAL VALUE 118 APPENDIX 6: FINANCIAL MODEL WITHOUT DEBT STRUCTURE 132 APPENDIX 7: FINANCIAL MODEL UNDER INFLATION .135 x List of tables Table 2.1: The investors of project and their chapter capital Table 3.1: Compare between competitive products in the market .20 Table 4.1: The separate equipments assembled in machine system and its suppliers 37 Table 4.2: The list of main machines in a fully production line 40 Table 4.3: Oven Power Loading and Out Put Chart of production system 40 Table 4.4: The price for renting the land located the factory of project 42 Table 4.5: Price offering of tenders for constructed categories 43 Table 4.6: The list of items of total initial investment capital .44 Table 4.7: The depreciation period applied on initial investment categories of project 45 Table 4.8: Depreciation schedule for initial the project of initial investments 46 Table 5.1: Production capacity planed to exploit year by year 49 Table 5.2: Products in volume produced and consumed year by year .51 Table 5.3: The detail of human resource cost 54 Table 5.4: The weighted and cost ratio between inputs and outputs 55 Table 5.5: Cost of goods sold of the project 56 Table 5.6: The detail of loan financed project .57 Table 5.7: Debt repayment schedule 58 Table 5.8: Financial structure of project 58 Table 5.9: Pro-income statement 60 Table 5.10: Turnover of working capital requirements 61 Table 5.11: Working capital requirement 63 Table 5.12: Pro-cash flow statement on equity point of view 65 Table 6.1: Calculate the beta of project by CAPM approach 68 Table 6.2: Calculate Return on equity (Re) by CAPM approach 69 Table 6.3: The result of project valuation 72 Table 6.4: Sensitivity of unit price on the NPV and IRR 73 Table 6.5: Sensitivity of productivity on the NPV and IRR 73 Table 6.6: Sensitivity of raw material cost per piece on the NPV and IRR .74 Table 6.7: Sensitivity of marketing cost on the NPV and IRR 75 Table 6.8: Sensitivity of sale cost on the NPV and IRR 75 123 Grace period Interest 1st year Increasr y-o-y Ceiling interest Income tax Expected return on equity-ke B TABLE FOR CALCULATION 2 Table 1: DEPRECIATION SCHEDULE Unit Items Main Machine System Initial investment value mil VND Depreciation mil VND Accumulate Depreciation mil VND Remaining value mil VND Land cost Initial investment value mil VND Depreciation mil VND Accumulate Depreciation mil VND Remaining value mil VND Plant building cost Initial investment value mil VND Depreciation mil VND Accumulate Depreciation mil VND Remaining value mil VND years 20% 1% 22% 25% 19% /year /year /year /year /year 10 103,983 103,983 10,398 10,398 93,585 93,585 10,398 20,797 83,186 83,186 10,398 31,195 72,788 72,788 10,398 41,593 62,390 62,390 10,398 51,991 51,991 51,991 10,398 62,390 41,593 41,593 10,398 72,788 31,195 31,195 10,398 83,186 20,797 20,797 10,398 93,585 10,398 10,398 10,398 103,983 (0) 23,023 460 460 22,563 22,563 460 921 22,102 22,102 460 1,381 21,642 21,642 460 1,842 21,181 21,181 460 2,302 20,721 20,721 460 2,763 20,260 20,260 460 3,223 19,800 19,800 460 3,684 19,339 19,339 460 4,144 18,879 18,879 460 4,605 18,418 46,005 1,840 1,840 44,164 44,164 1,840 3,680 42,324 42,324 1,840 5,521 40,484 40,484 1,840 7,361 38,644 38,644 1,840 9,201 36,804 36,804 1,840 11,041 34,964 34,964 1,840 12,881 33,123 33,123 1,840 14,721 31,283 31,283 1,840 16,562 29,443 29,443 1,840 18,402 27,603 103,983 23,023 23,023 46,005 46,005 124 Administration cost under construction Initial investment value mil VND Depreciation mil VND Accumulate Depreciation mil VND Remaining value mil VND Interest cost under construction period Initial investment value mil VND Depreciation mil VND Accumulate Depreciation mil VND Remaining value mil VND TOTAL Initial investment value mil VND Depreciation mil VND Accumulate Depreciation mil VND Remaining value mil VND Table 2: REIMBURSEMENT SCHEDULE Items (mil VND) Beginning Debt added Interst expense Repayment principle Total repayment End 1,818 1,818 606 606 1,212 1,212 606 1,212 606 606 606 1,818 21,112 21,112 7,037 7,037 14,075 14,075 7,037 14,075 7,037 7,037 7,037 21,112 195,941 0 195,941 195,941 20,342 20,342 175,598 175,598 20,342 40,685 155,256 155,256 20,342 61,027 134,914 1,818 21,112 134,914 12,699 50,796 122,215 122,215 12,699 63,495 109,516 127,000 115,455 92,364 69,273 46,182 23,091 0 0 0 26,116 22,747 18,248 25,640 15,872 4,657 11,545 23,091 23,091 23,091 23,091 23,091 37,661 45,838 41,339 48,730 38,963 27,748 115,455 92,364 69,273 46,182 23,091 109,516 12,699 76,194 96,817 96,817 12,699 88,893 84,118 84,118 12,699 101,591 71,419 71,419 12,699 114,290 58,720 58,720 12,699 126,989 46,021 125 Table 3: WORKING CAPITAL REQUIREMENT Items Cash (1) ∆ Cash (1') Receivables (2) ∆ Receveiables (2') Inventories (3) ∆ Inventories(3') Payables (4) ∆ Payables (4') Working capital (1+2+3-4) ∆ W.C (1'+2'+3'-4') Initial W.C investment WC return 7,644 7,644 7,644 7,644 21,939 21,939 10,970 10,970 26,258 12,060 4,416 12,060 4,416 30,904 8,964 15,452 4,482 39,573 13,315 13,632 1,571 13,632 1,571 33,892 2,988 16,946 1,494 44,209 4,637 15,005 1,373 15,005 1,373 35,624 1,732 17,812 866 47,821 3,612 16,378 1,373 16,378 1,373 38,612 2,988 19,306 1,494 52,062 4,240 17,751 1,373 17,751 1,373 41,600 2,988 20,800 1,494 56,302 4,240 19,124 1,373 19,124 1,373 44,588 2,988 22,294 1,494 60,542 4,240 20,497 1,373 20,497 1,373 47,576 2,988 23,788 1,494 64,782 4,240 20,596 99 20,596 99 47,576 23,788 64,980 198 10 20,596 20,596 47,576 23,788 64,980 26,258 64,980 126 Table 4: PROFIT & LOSS Items Revenue COGS Raw material cost Packeged cost Others Depreciation charge Direct labour cost COGS/Sales Gross margin Operating expense Sales cost Indirect labor cost Marketing cost Administration cost Operating expense / Sales EBIT EBIT/Sales Interest Profit before tax PBT/Sales Income tax Net income % net income/sales mil VND mil VND mil VND mil VND mil VND mil VND mil VND % mil VND mil VND mil VND mil VND mil VND mil VND % mil VND % mil VND mil VND % mil VND mil VND % 186,002 133,465 86,026 20,460 2,581 20,342 4,056 72% 52,537 49,410 18,600 6,630 18,600 5,580 27% 3,126 2% 26,116 (22,990) -12% (22,990) -12% 293,470 187,999 129,039 30,690 3,871 20,342 4,056 64% 105,471 74,128 29,347 6,630 29,347 8,804 25% 31,343 11% 22,747 8,596 3% 2,149 6,447 2% 331,703 206,176 143,376 34,100 4,301 20,342 4,056 62% 125,527 66,337 33,170 6,630 16,585 9,951 20% 59,190 18% 18,248 40,943 12% 10,236 30,707 9% 365,115 216,711 157,714 37,510 4,731 12,699 4,056 59% 148,404 72,351 36,511 6,630 18,256 10,953 20% 76,053 21% 25,640 50,414 14% 12,603 37,810 10% 398,526 234,889 172,052 40,920 5,162 12,699 4,056 59% 163,638 78,365 39,853 6,630 19,926 11,956 20% 85,273 21% 15,872 69,401 17% 17,350 52,051 13% 431,938 253,066 186,389 44,330 5,592 12,699 4,056 59% 178,871 84,379 43,194 6,630 21,597 12,958 20% 94,492 22% 4,657 89,836 21% 22,459 67,377 16% 465,349 271,244 200,727 47,740 6,022 12,699 4,056 58% 194,105 90,393 46,535 6,630 23,267 13,960 19% 103,712 22% 498,761 289,422 215,065 51,151 6,452 12,699 4,056 58% 209,339 96,407 49,876 6,630 24,938 14,963 19% 112,932 23% 501,172 289,422 215,065 51,151 6,452 12,699 4,056 58% 211,750 96,841 50,117 6,630 25,059 15,035 19% 114,909 23% 10 501,172 289,422 215,065 51,151 6,452 12,699 4,056 58% 211,750 96,841 50,117 6,630 25,059 15,035 19% 114,909 23% 103,712 112,932 114,909 114,909 22% 23% 23% 23% 25,928 28,233 28,727 28,727 77,784 84,699 86,182 86,182 17% 17% 17% 17% 127 Table 5: CASH FLOW STATEMENT Items Net income (+) Depreciation (+) Interest expense (+) Change in WC (-) Cash from operating activities Purchase of fix asset (-) Intial WC requirement (-) Interest charge in year (-) Fix asset disposal at the end (+) WC collection at the end (+) VAT deducted (+) Cash from investing activities Long term borrowing (+) LT Debt reimbursement (-) Interest (-) Cash from financing activities Total cashflow Accumulated cashflow C (22,990) 20,342 26,116 23,469 6,447 20,342 22,747 13,315 36,221 30,707 20,342 18,248 4,637 64,660 37,810 12,699 25,640 3,612 72,537 52,051 12,699 15,872 4,240 76,381 67,377 12,699 4,657 4,240 80,492 77,784 12,699 4,240 86,243 84,699 12,699 4,240 93,157 86,182 12,699 198 98,682 10 86,182 12,699 0 98,881 181,505 26,258 21,112 46,021 64,980 (202,617) 127,000 6,677 (19,581) 0 0 0 0 111,001 11,545 23,091 23,091 23,091 23,091 23,091 26,116 22,747 18,248 25,640 15,872 4,657 127,000 (37,661) (45,838) (41,339) (48,730) (38,963) (27,748) (75,617) (33,774) (9,617) 23,322 23,806 37,418 52,745 86,243 93,157 98,682 209,882 (75,617) (109,391) (119,008) (95,686) (71,880) (34,461) 18,283 104,526 197,684 296,366 506,248 PROJECT MEASUREMENT_EQUITY POINT OF VIEW VALUATION CRITERIA mil VND, effective NPV @ 19% 53,795 project IRR 26.4% /year MIRR 24.0% /year PI 1.71 times 128 Payback period Discounted Payback period ADSCR 5.65 year 8.14 year 1.88 times D PROJECT ACCESSMENT 4,500 4,600 4,700 4,800 4,900 5,000 5,100 5,200 5,300 5,400 5,500 Unit price VND/piece NPV @ 19% mil VND 53,795 (41,064) (21,790) (2,515) 16,759 35,316 53,795 72,274 90,753 109,232 127,710 146,189 IRR /year 26.4% 13.6% 16.2% 18.8% 21.4% 23.9% 26.4% 28.9% 31.4% 34.0% 36.5% 39.0% MIRR /year 24.0% 14.9% 17.0% 18.9% 20.7% 22.4% 24.0% 25.5% 27.0% 28.5% 29.7% 30.9% PI times 1.71 0.46 0.71 0.97 1.22 1.47 1.71 1.96 2.20 2.44 2.69 2.93 Payback period year 5.65 7.78 7.26 6.81 6.41 6.08 5.65 5.27 4.92 4.56 4.26 4.01 Discounted Payback period year 8.14 #REF! #REF! #REF! 9.51 8.99 8.14 7.47 6.89 6.42 5.99 5.53 ADSCR times 1.88 0.50 0.78 1.06 1.34 1.61 1.88 2.15 2.42 2.69 2.96 3.23 Productivity NPV @ 19% IRR MIRR PI Payback period Discounted Payback period ADSCR mil VND /year /year times year year times 53,795 26.4% 24.0% 1.71 5.65 8.14 1.88 Best 104,058 33.2% 27.9% 2.38 4.59 6.51 2.61 Base 53,795 26.4% 24.0% 1.71 5.65 8.14 1.88 Worst (45,016) 13.0% 14.4% 0.40 7.92 #REF! 0.45 1,800 1,900 1,950 2,000 2,050 2,100 2,150 2,200 2,250 2,300 Raw material cost per unit VND/piece NPV @ 19% mil VND 53,795 125,945 100,292 87,465 74,638 61,812 48,985 36,158 23,332 10,121 (3,268) IRR /year 26.4% 36.6% 32.9% 31.1% 29.3% 27.5% 25.8% 24.0% 22.3% 20.5% 18.7% 2,350 (16,657) 17.0% 129 MIRR PI Payback period Discounted Payback period ADSCR /year times year year times 24.0% 1.71 5.65 8.14 1.88 29.8% 2.67 4.24 5.95 2.93 27.9% 2.33 4.69 6.60 2.56 26.8% 2.16 4.97 6.95 2.37 25.7% 1.99 5.21 7.37 2.19 24.7% 1.82 5.47 7.82 2.00 23.6% 1.65 5.77 8.36 1.81 22.4% 1.48 6.07 8.97 1.63 21.3% 1.31 6.29 9.33 1.44 20.1% 1.13 6.55 9.70 1.25 18.9% 0.96 6.83 #REF! 1.05 17.6% 0.78 7.14 #REF! 0.86 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% %Marketing cost in 1st year/Revenue %/Revenue NPV @ 19% mil VND 53,795 69,350 66,239 63,128 60,017 56,906 53,795 50,684 47,573 44,425 40,798 37,170 IRR /year 26.4% 29.1% 28.6% 28.0% 27.5% 27.0% 26.4% 25.9% 25.4% 25.0% 24.4% 23.9% MIRR /year 24.0% 25.8% 25.5% 25.1% 24.7% 24.3% 24.0% 23.6% 23.3% 23.0% 22.6% 22.3% PI times 1.71 1.92 1.88 1.83 1.79 1.75 1.71 1.67 1.63 1.59 1.54 1.49 Payback period year 5.65 5.27 5.35 5.42 5.50 5.58 5.65 5.73 5.81 5.89 5.98 6.04 Discounted Payback period year 8.14 7.45 7.59 7.72 7.86 7.99 8.14 8.30 8.45 8.60 8.78 8.96 ADSCR times 1.88 2.11 2.06 2.02 1.97 1.93 1.88 1.84 1.79 1.75 1.69 1.64 %Sales cost/Revenue %/Revenue 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% NPV @ 19% mil VND 53,795 88,853 77,167 65,481 53,795 42,109 30,423 18,700 6,498 (5,705) (17,908) (30,110) IRR /year 26.4% 31.3% 29.6% 28.0% 26.4% 24.8% 23.3% 21.7% 20.0% 18.4% 16.8% 15.1% MIRR /year 24.0% 26.9% 25.9% 25.0% 24.0% 23.0% 21.9% 20.9% 19.8% 18.6% 17.4% 16.2% PI times 1.71 2.18 2.02 1.87 1.71 1.56 1.40 1.25 1.09 0.92 0.76 0.60 Payback period year 5.65 4.95 5.17 5.40 5.65 5.94 6.16 6.37 6.62 6.88 7.17 7.47 Discounted Payback period year 8.14 6.92 7.29 7.69 8.14 8.67 9.13 9.46 9.81 #REF! #REF! #REF! ADSCR times 1.88 2.39 2.22 2.05 1.88 1.71 1.54 1.37 1.19 1.02 0.84 0.66 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000 18,000 19,000 Human resource expense mil VND NPV @ 19% mil VND 53,795 59,605 56,159 52,713 49,267 45,821 42,375 38,929 35,483 32,037 28,591 25,145 IRR /year 26.4% 27.3% 26.8% 26.3% 25.8% 25.3% 24.8% 24.3% 23.9% 23.4% 22.9% 22.5% 130 MIRR PI Payback period Discounted Payback period ADSCR 24.0% 1.71 5.65 8.14 1.88 24.5% 1.79 5.51 7.90 1.97 24.2% 1.74 5.60 8.04 1.92 23.9% 1.70 5.68 8.19 1.87 23.6% 1.65 5.77 8.35 1.82 23.3% 1.61 5.86 8.51 1.77 22.9% 1.56 5.95 8.68 1.72 22.6% 1.51 6.03 8.84 1.67 22.3% 1.47 6.08 9.01 1.62 22.0% 1.42 6.14 9.10 1.57 21.7% 1.38 6.20 9.19 1.52 21.4% 1.33 6.27 9.29 1.47 % Sensitivity of Raw material cost 53,795 1,800 1,900 4,500 4,600 4,700 4,800 4,900 5,000 5,100 5,200 5,300 5,400 5,500 33,551 52,030 70,509 88,988 107,466 125,945 144,424 162,903 181,382 199,768 217,645 7,470 26,377 44,855 63,334 81,813 100,292 118,771 137,249 155,728 174,207 192,686 1,950 2,000 2,050 2,100 2,150 2,200 2,250 2,300 2,350 (5,918) (19,307) (32,696) (46,085) (59,474) (72,863) (86,252) (99,903) (113,879) 13,356 (33) (13,422) (26,810) (40,199) (53,588) (66,977) (80,366) (93,755) 32,029 19,202 5,853 (7,536) (20,925) (34,314) (47,702) (61,091) (74,480) 50,508 37,681 24,854 11,739 (1,650) (15,039) (28,428) (41,817) (55,206) 68,986 56,160 43,333 30,506 17,624 4,235 (9,153) (22,542) (35,931) 87,465 74,638 61,812 48,985 36,158 23,332 10,121 (3,268) (16,657) 105,944 93,117 80,291 67,464 54,637 41,811 28,984 16,007 2,618 124,423 111,596 98,769 85,943 73,116 60,289 47,463 34,636 21,809 142,902 130,075 117,248 104,422 91,595 78,768 65,942 53,115 40,288 161,380 148,554 135,727 122,900 110,074 97,247 84,420 71,594 58,767 179,859 167,033 154,206 141,379 128,553 115,726 102,899 90,073 77,246 % Sensitivity of Productivity Senario 53,795 mil VND % Sensitivity of Unit price % Sensitivity of Unit price mil VND Sensitivity of Unit Price /year times year year times 4,500 4,600 4,700 4,800 4,900 (6,803) 15,940 37,969 59,999 82,028 (41,064) (21,790) (2,515) 16,759 35,316 (108,642) (95,461) (82,546) (69,836) (57,247) 131 5,000 5,100 5,200 5,300 5,400 5,500 104,058 126,087 148,117 170,146 191,405 212,633 53,795 72,274 90,753 109,232 127,710 146,189 (45,016) (32,786) (20,556) (8,325) 3,905 16,135 53,795 % Sensitivity of Unit price % Sensitivity of Sales cost mil VND 4,500 4,600 4,700 4,800 4,900 5,000 5,100 5,200 5,300 5,400 5,500 7% (8,117) 11,890 31,313 50,493 69,673 88,853 108,033 127,213 146,393 165,573 184,753 8% (19,099) 663 20,328 39,275 58,221 77,167 96,113 115,060 134,006 152,952 171,898 9% (30,082) (10,563) 8,955 28,056 46,769 65,481 84,194 102,906 121,619 140,331 159,044 10% 11% 12% (41,064) (52,047) (63,029) (21,790) (33,016) (44,243) (2,515) (13,986) (25,456) 16,759 5,045 (6,670) 35,316 23,864 12,117 53,795 42,109 30,423 72,274 60,354 48,435 90,753 78,599 66,446 109,232 96,844 84,457 127,710 115,090 102,469 146,189 133,335 120,480 13% (74,011) (55,469) (36,927) (18,384) 158 18,700 36,515 54,292 72,070 89,848 107,625 14% (84,994) (66,696) (48,397) (30,099) (11,801) 6,498 24,595 42,139 59,683 77,227 94,771 15% 16% 17% (96,151) (107,575) (119,312) (77,922) (89,149) (100,697) (59,868) (71,338) (82,809) (41,814) (53,528) (65,243) (23,759) (35,718) (47,677) (5,705) (17,908) (30,110) 12,349 (98) (12,544) 29,986 17,713 5,022 47,296 34,909 22,521 64,606 51,985 39,364 81,916 69,062 56,207 132 APPENDIX 6: FINANCIAL MODEL WITHOUT DEBT STRUCTURE Financed Structure Unit Debt Equity Total Table 1: PROFIT & LOSS Items Revenue COGS Raw material cost Packeged cost Others Depreciation charge Direct labour cost COGS/Sales Gross margin Operating expense Sales cost Indirect labor cost Marketing cost Administration cost Operating expense / Sales EBIT Initial Investment mil VND 181,505 181,505 % 0% 100% 100% mil VND 186,002 293,470 331,703 365,115 mil VND 126,428 180,961 199,139 216,711 mil VND 86,026 129,039 143,376 157,714 mil VND 20,460 30,690 34,100 37,510 mil VND 2,581 3,871 4,301 4,731 mil VND 13,305 13,305 13,305 12,699 mil VND 4,056 4,056 4,056 4,056 % 68% 62% 60% 59% mil VND 59,574 112,508 132,564 148,404 mil VND 49,410 74,128 66,337 72,351 mil VND 18,600 29,347 33,170 36,511 mil VND 6,630 6,630 6,630 6,630 mil VND 18,600 29,347 16,585 18,256 mil VND 5,580 8,804 9,951 10,953 % 27% 25% 20% 20% mil VND 10,164 38,380 66,228 76,053 398,526 234,889 172,052 40,920 5,162 12,699 4,056 59% 163,638 78,365 39,853 6,630 19,926 11,956 20% 85,273 431,938 253,066 186,389 44,330 5,592 12,699 4,056 59% 178,871 84,379 43,194 6,630 21,597 12,958 20% 94,492 465,349 271,244 200,727 47,740 6,022 12,699 4,056 58% 194,105 90,393 46,535 6,630 23,267 13,960 19% 103,712 498,761 289,422 215,065 51,151 6,452 12,699 4,056 58% 209,339 96,407 49,876 6,630 24,938 14,963 19% 112,932 501,172 289,422 215,065 51,151 6,452 12,699 4,056 58% 211,750 96,841 50,117 6,630 25,059 15,035 19% 114,909 10 501,172 289,422 215,065 51,151 6,452 12,699 4,056 58% 211,750 96,841 50,117 6,630 25,059 15,035 19% 114,909 133 EBIT/Sales Interest Profit before tax PBT/Sales Income tax Net income % net income/sales Table 2: CASH FLOW STATEMENT Items Net income (+) Depreciation (+) Interest expense (+) Change in WC (-) Cash from operating activities Purchase of fix asset (-) Intial WC requirement (-) Interest charge in year (-) Fix asset disposal at the end (+) WC collection at the end (+) VAT deducted (+) Cash from investing activities Long term borrowing (+) LT Debt reimbursement (-) Interest (-) Cash from financing activities Total cashflow Accumulated cashflow % mil VND mil VND % mil VND mil VND % 5% 10,164 5% 2,541 7,623 4% 13% 38,380 13% 9,595 28,785 10% 7,623 13,305 0 20,928 20% 66,228 20% 16,557 49,671 15% 21% 76,053 21% 19,013 57,040 16% 28,785 13,305 13,315 28,775 49,671 13,305 4,637 58,339 21% 85,273 21% 21,318 63,955 16% 57,040 12,699 4,190 65,549 22% 22% 23% 23% 23% 94,492 103,712 112,932 114,909 114,909 22% 22% 23% 23% 23% 23,623 25,928 28,233 28,727 28,727 70,869 77,784 84,699 86,182 86,182 16% 17% 17% 17% 17% 63,955 12,699 4,240 72,413 70,869 12,699 4,240 79,328 77,784 12,699 4,240 86,243 84,699 12,699 4,240 93,157 86,182 12,699 198 98,682 10 86,182 12,699 0 98,881 181,505 25,679 46,021 64,980 (181,505) 0 (181,505) (181,505) 6,677 (19,003) 0 1,925 (179,580) 0 0 0 0 111,001 0 0 0 0 0 0 0 28,775 58,339 65,549 72,413 79,328 86,243 93,157 98,682 209,882 (150,805) (92,466) (26,917) 45,496 124,824 211,067 304,224 402,907 612,789 134 PROJECT MEASUREMENT_EQUITY POINT OF VIEW NPV @ 19% 70,157 mil VND, effective project IRR 26.1% /year MIRR 23.1% /year PI 1.39 times Payback period 4.37 year Discounted Payback period 7.41 year 135 APPENDIX 7: FINANCIAL MODEL UNDER INFLATION Items INFLATION FACTOR Forecasted inflation year NOMINAL ROE Real ROE Inflation rate Year Table Items Revenue COGS Raw material cost Packeged cost Others Depreciation charge Direct labour cost COGS/Sales Gross margin Operating expense Sales cost Indirect labor cost Marketing cost Administration cost Operating expense / Sales EBIT EBIT/Sales Interest PROFIT & LOSS Year mil VND mil VND mil VND mil VND mil VND mil VND mil VND % mil VND mil VND mil VND mil VND mil VND mil VND % mil VND % mil VND 1.00 12.28% 33.79% 19.16% 12.28% 10 1.12 1.26 1.42 1.59 1.78 2.00 2.25 2.53 2.84 3.18 208,843 149,855 96,590 22,973 2,898 22,840 4,554 72% 58,988 55,478 20,884 7,444 20,884 6,265 27% 3,510 2% 29,323 369,971 237,006 162,677 38,691 4,880 25,645 5,113 64% 132,965 93,452 36,997 8,358 36,997 11,099 25% 39,514 11% 28,677 469,523 291,841 202,948 48,269 6,088 28,794 5,741 62% 177,682 93,899 46,952 9,385 23,476 14,086 20% 83,783 18% 25,829 580,282 344,422 250,657 59,616 7,520 20,183 6,446 59% 235,861 114,988 58,028 10,537 29,014 17,408 20% 120,873 21% 40,749 711,163 419,154 307,023 73,022 9,211 22,661 7,238 59% 292,008 139,840 71,116 11,831 35,558 21,335 20% 152,168 21% 28,323 10 865,437 1,046,877 1,259,829 1,421,374 1,595,918 507,048 610,207 731,057 820,830 921,628 373,453 451,568 543,236 609,945 684,846 88,821 107,400 129,202 145,068 162,882 11,204 13,547 16,297 18,298 20,545 25,444 28,568 32,076 36,015 40,438 8,127 9,125 10,245 11,503 12,916 59% 58% 58% 58% 58% 358,389 436,670 528,772 600,544 674,290 169,063 203,353 243,516 274,651 308,378 86,544 104,688 125,983 142,137 159,592 13,284 14,915 16,747 18,803 21,112 43,272 52,344 62,991 71,069 79,796 25,963 31,406 37,795 42,641 47,878 20% 19% 19% 19% 19% 189,327 233,317 285,256 325,893 365,913 22% 22% 23% 23% 23% 9,330 136 Profit before tax PBT/Sales Income tax Net income % net income/sales mil VND % mil VND mil VND % Table 2: CASH FLOW STATEMENT Items Net income (+) Depreciation (+) Interest expense (+) Change in WC (-) Cash from operating activities Purchase of fix asset (-) Intial WC requirement (-) Interest charge in year (-) Fix asset disposal at the end (+) WC collection at the end (+) VAT deducted (+) Cash from investing activities Long term borrowing (+) LT Debt reimbursement (-) Interest (-) Cash from financing activities Total cashflow Accumulated cashflow (25,813) -12% (25,813) -12% 10,836 3% 2,709 8,127 2% (25,813) 22,840 29,323 26,351 57,954 12% 14,489 43,466 9% 8,127 25,645 28,677 16,786 45,663 80,123 123,844 179,996 14% 17% 21% 20,031 30,961 44,999 60,092 92,883 134,997 10% 13% 16% 43,466 28,794 25,829 6,563 91,526 60,092 20,183 40,749 5,741 115,284 92,883 22,661 28,323 7,567 136,301 233,317 22% 58,329 174,988 17% 285,256 23% 71,314 213,942 17% 325,893 23% 81,473 244,420 17% 365,913 23% 91,478 274,434 17% 134,997 174,988 213,942 244,420 25,444 28,568 32,076 36,015 9,330 0 8,496 9,539 10,710 562 161,276 194,017 235,308 279,873 10 274,434 40,438 0 314,873 181,505 29,482 21,112 146,549 206,922 (202,617) 127,000 7,497 (21,985) 0 0 0 0 353,470 12,963 29,110 32,685 36,699 41,205 46,265 29,323 28,677 25,829 40,749 28,323 9,330 127,000 (42,286) (57,787) (58,514) (77,448) (69,529) (55,595) (75,617) (37,921) (12,124) 33,012 37,836 66,772 105,680 194,017 235,308 279,873 668,343 (75,617) (113,538) (125,662) (92,650) (54,815) 11,958 117,638 311,655 546,963 826,836 1,495,179 137 PROJECT MEASUREMENT_EQUITY POINT OF VIEW NPV @ 19% 53,795 mil VND, effective project IRR 42.0% /year MIRR 34.6% /year PI 4.64 times Payback period 4.82 year Discounted Payback period 6.23 year ADSCR 3.43 times