PROJECT INVESTMENT "A NEW FINISHING WORKSHOP" CONTENT Introduction: Minh Phuong Furniture Ltd was formally established on 11.19.2002, (abbreviated as MPF), it's located at S12 - 13, Bau Cat, P13 , Tan Binh District, HCMC With the function of producing furniture export business This is a small company, there are four family members; at the time of its establishment, has charter capital of billion VNĐ To meet production and business tasks initially, in the existing conditions, the Board of management decided for investment "a new Finishing workshop" at 12/14c Man Thien Road, Tang Nhon Phu Ward, District 9, HCMC MPF is an independent economic unit operating under current corporate law, the management of all aspects of the project owner is also the director of the enterprise Type of investment is fully equipped in a new workshop on the power plant hire This project is an investment in small-scale production that I was directly made The data presented in this exercise is the real data, keep the price from building project time (2003) Partial implementation schedule be adjusted according to the present time The project presented here is also limited to the economic criteria, the layout could be adjusted to suit all requirements However, the core part of the project remains the same Description of Project: To meet the immediate demands of production, this project outlines a feasible plan to invest in building a workshop, aimed at finishing stages of wooden furnitures The project refers to the key issues such as acquisition, construction, original equipment, investment and efficiency issues related to a newly established unit; with the accurate calculation based on the study prices in order to limit costs incurred in the implementation process Also, this project is the basis for Board of management consideration and approval authorities for consideration 2.1 The need for investment: Besides the renovation policy of the State, the influence of trend in the world enabling manufacturers not only expanded the scope for domestic consumption but also the direction to search abroad new opportunities for themselves Recent years due to political situation and social security in Indonesia; price of labor in Malaysia, Taiwan, Thailand making furniture ineffective, traders became interested in exposed to the manufacturers in Vietnam to search for new sources MPF fortunate to have access to the foreign importers can buy in large quantity and long term stability It is the necessary premise to decide "for investment Finishing equipped workshop" with the appropriate technology to meet the demand for quantity and quality The investment in new production facilities to not only expand but also the commitment confirmed, improving customer faith and society Specifically: - To ensure better production environment, - Create more jobs for the society, - There are conditions associated with other production units in order to promote the synergy of small units, improve competitiveness 2.2 Feasibility Study: 2.2.1 Production: The major product of the company is bedroom furniture The wood raw material is imported from New Zealand and MDF imported from Malaysia Because of the variety of items in production, so we choose bedside to bench-product capacity Accordingly all the products being produced are provided on the basis of FOB bedside Production expected 10 x 40 'containers / month (1x40' container contains 480 bedsides) MPF is not advocate production from A till Z, just focused on design, modeling to develop market and complete the finishing stages For raw products, MPF associated with the production unit to carry out, or supply the imported lumber, inspection, return the products on the basis of economic contracts 2.2.2 Sale of products: MPF products are 100% exported to Australia, Europe We already have orders to the end of year and is promoting the development of products, the market for later years The company signed a contract directly with customers, organizing subcontract satellites, purchasing products, directly to finishing, packaging and shipment Revenue is expected in table Table 1: Expected revenue Description Unit Goods of sales USD Standard products Sp Convert to 40’ cont Container 1st Year 300,000 9,174 19 2nd Year 1,000,000 30,581 64 3rd Year 1,500,000 45,872 96 4th Year 2,000,000 61,162 127 2.3 Estimation: 2.3.1 Construction: Using an area of 1000 m2 was employed, with the existing utility infrastructure, it's not invest for construction 2.3.2 Machinery and equipment needed: Based and designed capacity of the coating line manufacturer and experienced of the units in the field, we calculated the machinery needs to meet minimum production requirements of the finishing stage in table Table 2: Demand for equipment No Equipment Hanging line Pallet line Spraying booth Equip for environmental treatment: Filter & air supply Drying the coating system Air compressors (bought in VN) Portable machines (bought in VN) Quant ity Model HCL 120 Model PCL X-458 Model SPB – 20’ Country of origin Malaysia Malaysia Malaysia Model FTA –100 PCH – 80 2 Malaysia Japan Taiwan 2.3.3 Production diagram: as outlined below: Material Shipping Pre-cutting Inspected Re-fining Packaging Sanding Spraying Assembling Sanding Sanding Inspected In this production scheme, MPF focused the last steps, from inspection to shipment 2.4 Estimates investment costs: (VNĐ) 2.4.1 Cost workshop: Annual rental premises Upgrading buildings Air compressed system Total: 240,000,000 20,000,000 70,000,000 330,000,000 2.4.2 Equipment: - coating lines hanging line pallet line 70,000,000 370,000,000 - Production tools 50,000,000 - Transportation - Environmental treatment equips 300,000,000 Total: - Working capital 110,000,000 900,000,000 500,000,000 Total investment costs 1,730,000,000 (one billion seven hundred & thirty million VNĐ) 2.4.3 The items are not included in the estimates: - This is a small scale project, the project manager is the owner, direct write, review prices, select contractors and project management So the costs associated with setting up and managing projects are not included in the estimate - The cost finishing lines design, transportation to and installation of the units are included in the products costs should also not alone in the estimates 2.4.4 Capital sources: Investment include two sources: - Shareholders' equity 1,000,000,000 Loans 730,000,000 Total: 900 million 2.5 ROI analysis: Effective investment of the project are summarized in tables 3, 4, 5, 6, 7, and below: Currencies in the tables are in $US Table 3: Depreciation plan No Description Origin Time of Depreciation price depreciation /month Depreciation value 1st Year 2nd Year 3rd Year+ Transportation means 19,355 202 - 1,210 2,419 Coating lines 28,500 297 594 3,563 3,563 Environmental treatment equips 7,100 74 148 888 888 4 Production tools and others 13,230 368 2,205 3,308 4,410 Office equipments 25,541 426 2,554 3,831 5,108 Machines at present 10,339 172 1,723 2,068 2,068 7,224 14,866 18,455 Total 104,065 Table 4: Costs plan 1st Year 2nd Year 3rd Year 4th Year Input products 169,902 596,941 849,549 1,132,720 Packaging & auxiliaries 12,385 41,284 61,927 82,569 Labor 9,660 32,202 48,303 64,404 Chemical coating 22,018 73,394 110,093 146,789 213,965 743,822 1,069,873 1,426,481 Description Cộng Table 5: Lost & profit plan 1st Year 2nd Year 3rd Year 4th Year Turnover: 300,000 1,000,000 1,500,000 2,000,000 Input products 169,902 596,941 849,549 1,132,720 Materials, auxiliary materials, coating, packaging 34,403 114,679 172,020 229,358 Direct wages 9,660 32,202 48,303 64,404 - Repair & maintenance 300 600 750 900 - Parts & repairing equipment 300 600 750 900 - Hiring workshop 6,968 10,452 13,936 13,936 - Costs of electricity & water 3,240 6,480 8,100 9,720 - Other costs of production 1,000 2,000 2,500 3,000 - Production tools 1,000 2,000 2,500 3,000 Total production costs 226,773 765,954 1,098,408 1,457,937 - Indirect wages 12,000 36,000 50,000 60,000 - Bonnus, Holidays, Tết 2,000 4,800 6,667 8,000 - Office expenses 600 1,200 1,800 2,400 - Reception fee 900 1,800 2,700 3,600 1,000 2,000 3,000 4,000 Description Production costs: Company management costs - Administration fee - Petrol & car maintenance 4,500 6,750 9,000 - Telephone, fax, press 1,200 2,400 3,600 4,800 - Depreciation 7,224 14,866 18,455 18,455 3,682 11,594 16,712 21,149 300 1,000 1,500 2,000 - Other management costs 1,000 2,000 2,500 3,000 - Sampling costs 1,000 2,000 3,000 4,000 Total 30,906 84,160 116,683 140,404 - Bank charge 2,250 7,500 11,250 15,000 - Goods delivery costs 3,800 12,800 19,200 25,400 - Sales expenses 30,000 100,000 150,000 200,000 Total 36,050 120,300 180,450 240,400 293,729 970,414 1,395,541 1,838,741 6,271 29,586 104,459 161,259 - Social insurance, healthcare, Accident, labor protection - Fire prevention Costs of circulation Total costs Revenue - Expenses (profit / lost) 2.5.1 The financial rates: Table 6: Value added ratio (%) - 1st Year 2nd Year 3rd Year 4th Year 300,000 1,000,000 1,500,000 2,000,000 204,305 711,620 1,021,569 1,362,078 95,696 288,380 478,431 637,923 31.90 28.84 31.90 31.90 Table 7: Profit ratio (%) Profit on turnover rate - 1st Year - 2nd Year - 3rd Year - 4th Year Profit on investment rate - 1st Year - 2nd Year - 3rd Year - 4th Year Profit 6,271 29,586 104,459 161,259 Turnover 300,000 1,000,000 1,500,000 2,000,000 Rates 2.09 2.96 6.96 8.06 6,271 29,586 104,459 161,259 68,185 136,323 136,323 136,323 9.20 21.70 76.63 118.29 Table 8: Breakeven point ($US) 1st Year Variable costs Fixed costs Breakeven point 213,965 79,764 278,133 2nd Year 743,822 226,592 884,510 3rd Year 1,069,872 325,669 1,135,718 4th Year 1,426,481 412,260 1,437,650 Table 9: Payback period Description 1st Year 2nd Year 3rd Year 4th Year Initial capital investment Accumulated net income Of which: Depreciation Net profit 111,613 13,495 7,224 6,271 57,947 14,866 29,586 180,861 18,455 104,459 360,575 18,455 161,259 Payback period = years months 2.6 Risk assessment and alternatives: MPF has target market for investment and development purposes This project is small, execution time is short (6 months), the partners all know each other & the price is committed un-change, so that there will be no risks A minor risk can occur is the exchange rate at time of payment may change adversely, but not great Alternative is to use the profits to offset Schedule: Please see attached PDF file Review Project: After examining the feasibility factors as discussed above, the BOM has agreed to conduct the project On 18/06/2003, HCMC People's Committee has decided to enjoy investment incentives 4.1 Key personnel and related parties: 4.1.1 Key staff: To ensure the implementation of this project, the BOM has assigned: - The director is the commander, relations with foreign partners Engineer in charge of the company direct technical supervision of construction and acceptance - Chief Accountant to capital, ensure of international payments and investment performance measurement - Workshop Manager responsible for measuring productivity and quality before and after investment 4.1.2 Stakeholders: - Minh Phuong Furniture Ltd., owner of investment, is responsible for import procedures, acceptance and payment on time Avent Company Pte Singapore, supply and installation the environmental treatment equipments Goldin Yaja Bhd Malaysia, supply and installation two finishing lines 4.2 Allocation of resources: - The financial sources of investment expected in Section 2.4 was Agriculture and Rural Development Banks, branch guaranteed - Human resources assigned in Section 4.1.1 is part-time and really busy at the installation time It's not necessary a person in charge 4.3 Process control: - The coating lines and environmental treatment systems is inspected by the manufacturer & send a certificate of quality accompanied by export documents - Install within 10 working days, testing and commissioning of payment 15 days before the last payment 4.4 Implementation: - During assembly time, the engineer in charge of coordinating with supplyer technicians hand over the assembly, providing the necessary facilities and technical monitoring progress - Workshop Manager to coordinate hospital and spend additional labor when required Reporting and evaluation project: 5.1 Reporting: - During the time of implementation, any department with any problems, report promptly to the director for resolution - Seven days (7) after completion of the project, the personnel involved must report the results to the Director 5.2 Project evaluation: After 30 days of trial operation, Manager must report the results of measurement and evaluation of productivity and quality before and after investment Chief Accountant based on this report to analyze efficiency 5.3 Conclusion: The project was established based on needs, the BOM agreed Capital investment is defined and guaranteed from the beginning All cost factors are determined on the basis of quotation, and negotiate to ensure that does not arise in the implementation process 5.3.1 Economic Benefits: - - Value added from year onwards stabilized at 31.2%, contributing to increased production of the national economy, by increasing the net value of about US$ 867.280 / year in operation stability Quick payback period, only years months Products produced by the company exports 100%, net foreign exchange gain of about 43% of sales Taxes paid by the company will also increase 5.3.2 Social benefits: When the project operation 60 local labors will attract, creating jobs for local, not to mention the satellites supply goods to the company The technology that is relatively compact modern fitted furniture industry at the time of investment, contribute to increasing the level of management, technology and labor productivity of society Confidence to customers on order fulfillment capabilities ***** It is important that after months of implementation, the project was completed and put into operation as expected Very successful project, entitled to investment incentives Ending in English 4/8/2012 Huynh Van Hanh 10