INTERNATIONAL BUSINESS MANAGEMENT ANALYSIS AND EVALUATION ON EFFECTS OF “BAC KAN SOFT IRON PRODUCTION FACTORY” PROJECT

Paris Graduate School of Management Thai nguyen University INTERNATIONAL EXECUTIVE MASTER OF BUSINESS ADMINISTRATION PROGRAM THESIS TITLE: INTERNATIONAL BUSINESS MANAGEMENT ANALYSIS AND EVALUATION ON EFFECTS OF “BAC KAN SOFT IRON PRODUCTION FACTORY” PROJECT Student’s name: DANG HUU KY Intake I November, 2012 GRADUATION THESIS ACKNOWLEDGEMENT To complete this thesis, I would like to send my honest thanks to: - Associate Professor Dr Tran Van Binh, Institute of Economic management – Hanoi University of Science and Technology spent a lot of time and guided me by whole hearted during the process of thesis research - Respectfully thanks to Teachers of Paris Management University, Thai Nguyen University as well as Vietstar training Joint stock company for organizing courses and directly training, communicate your precious and practical knowledge in twelve subjects of the course - Sincerely thanks to the management board of Material and complete equipment Export and import corporation (MATEXIM) for their best supports and providing related information in the process of thesis research and complement - Heartfelt thanks to members in the class IeMBA.b01 who are always willing to exchange and offer suggestions as well as help me in the studying course and completing this thesis Respectfully thanks Student Dang Huu Ky International Executive Master of Business Administration Program GRADUATION THESIS TABLE OF CONTENT INTRODUCTION 1 Name of thesis: Analysis and evaluation on effects of “Bac Kan soft iron production factory” project 2 Reason of choosing this thesis: .2 Targets of the research .3 The method of research Database for research .3 Structure of the thesis: the thesis includes 03 chapters and the introduction as follows: Conclusion and suggestions: 1.2 Contents of the project feasibility study 1.2.1 Feasibility Study: 1.2.2 Nature and purpose of feasibility study 1.2.3 Major contents of feasibility study 1.3 Financial-economic analysis for investment projects .8 1.3.1 Determination of investment capital .8 1.3.2 Expectation of revenues and project costs 11 1.3.3 Determination of profit, loss, and cash flow of project 12 1.4 Sensitivity analysis 26 CHAPTER II .28 INTRODUCTION OF CONSTRUCTION INVESTMENT PROJECT “BAC KAN SPONGE IRON FACTORY” 28 2.1 About the Investor .28 2.1.1 Overview of Material and Complete Equipment Export-Import Corporation “Matexim” 28 2.1.2 Functional Task, activity areas 29 2.1.3 The organizational management structure 29 2.1.4 Production and business characteristics of the company .31 2.2 Introduction of Construction Investment Project “Bac Kan Sponge Iron Factory” .34 2.2.1 The necessity of investment 34 2.2.2 Investment purposes: 41 2.2.3 Research of project market 41 2.2.4 Capacity and product 45 2.2.5 Technology 46 International Executive Master of Business Administration Program GRADUATION THESIS 2.2.6 Plan and place of factory 48 2.2.7 Labor organization .50 2.2.8 Total investment capital .53 CHAPTER III 57 ECONOMIC AND FINANCIAL BENEFIT ANALYSIS OF INVESTMENT PROJECT OF BAC KAN SPONGE IRON FACTORY 57 3.1 Total capital: .57 3.2 Source of capital: 57 3.3 Production plan: 57 3.3.1 Capacity and output .57 3.3.2 Demand for material 57 3.4 Production cost 60 3.5 Estimated project revenue 62 3.6 Interest and loan payment plan 63 3.7 Cash flow of project: 63 3.8 Economic- Financial analysis .64 3.9 Project scenario analysis: 65 CONCLUSION AND RECOMMENDATIONS 67 Reference documents 68 International Executive Master of Business Administration Program GRADUATION THESIS International Executive Master of Business Administration Program GRADUATION THESIS INTRODUCTION Vietnam - one underdeveloped agricultural country went through two big wars which had pushed its economy to be lagged behind economically in comparison with the world’s After two years of independence (30/4/1975), Vietnam jointed into the United Nations and officially became one member in the United Nations Due to centrally – planed economic management model, Vietnam’s economy did not developed during a long time then always stayed at the backward top of the world Recognizing this matter, until the sixth national party congress (1986) under the objective view, our country chose economic development model in the direction of socialist republic oriented market instead of centrally – planned economic management model In 1995, Vietnam participated into ASEAN and about eleven years later continued to joint in WTO (2006), then became the 150 th member of WTO During more last two decades, our economy has gained significant developments Breaking through since 2000 until now, the economy has grew at the annual average of 7,73% (source from Legatum Institute (http://www.li.com), belonged to the leading top of the continent Currently, Vietnam’s economy has overcome out of the poorest country top of the world with the income per capita of 1300$ However, it is still a great distance compared with countries in the same region such as Income per capita in Vietnam lagged behind about 51 years in comparison with Indonesia’s, about 95 years in comparison with Thailand’s and 158 years in comparison with Singapore’s (According to Sai gon times on 5.4.2012) Based on student’s opinions, in order to shorten this distance, then beside determining proper national strategy, strict legal system not by the way of saving, but the only way for us is investment Only by investment, we can increase labor output, then innovate technologies, continually take fully advantages of national sources of the country (oil, mineral, mining, forestry, sea…) as well as create products meeting with higher and higher demands of people in general and International Executive Master of Business Administration Program Page GRADUATION THESIS customer’s in particular The investment activities must come along with projects meanwhile for projects to be effective, then it must be objective in the process of setting up projects, we must analyze and evaluate carefully factors influencing on projects and especially good project management In the scope of thesis, student focuses on researching and evaluating an important perspective of the project which is “effects of the project” Name of thesis: Analysis and evaluation on effects of “Bac Kan soft iron production factory” project Reason of choosing this thesis: According to the statistics of Investment and planning Ministry, annually Vietnam has about 20.000 companies born out but about 30% of companies going to bankrupt during about years Especially in some first months of 2012, there have been 50.000 companies going to bankrupt Some companies are step by step developing so much, but beside that there are many companies which are still staying stalled, produce moderately or go to be ruined… why? In addition of strategy, market, capital source, objective reasons from macro management of the Government, one of main reasons leading to failures of those companies is that effects of the project investment are low or loss The development of companies and widely country’s economy, we must be straight to say that non investment means that companies are going to be ruined and absolutely the economy will not develop We can see that the core of the investment is to gain profit and offer jobs for employees In order to gain profit, the research and studying works must be careful and accurate There are some projects which are considered as high economical effective ones, but actually after being completed and going into operation, they face to great losses What is reason? In my opinion, the main reason is that the analysis of project’s effects is not right, provided data is not accurate In the fact that this issue happened to many real state projects, brick production factory, concrete production factory, mining projects International Executive Master of Business Administration Program Page GRADUATION THESIS Material and complete equipment Export and import corporation (MATEXIM) is one company operating in some traditional scopes such as trading, transportation, real estate However, now it was supplemented with completely new one which is mining and product manufacture from ore This scope was carried out by iron ore exploitation and investment projects and soft iron production factory in Bac Kan This is one big and daring project of the company that decides survival and business strategies in long term for the company In the scope of the thesis, I really expect to analyze and evaluate effects of Bac Kan soft iron production factory project under my knowledge trained in MBA course and researching results Targets of the research In this thesis, I took fully advantages of theories studied in MBA course, researching documents in order to analyze and evaluate as well as research factors related to effects of the project, then propose solutions for the project to be more effective, limit risks for the company The method of research 4.1 Methods used as follows: - Research case study of Matexim Company and some other projects which have been operating in the northern area - Make statistics and analysis on market, collect actual information, treat data and use database of consulting services in the technical field 4.2 Offer conclusion based on the procedure: collect information – process information – estimate price of future market – offer solutions – find the most optimal solution - conclusion Database for research 5.1 Use database studied in MBA course, especially project management course, enterprise finance, strategic management 5.2 Use database from projects provided by Matexim Company, actual data from some projects of domestic and foreign factories 5.3 Data sources from professional organizations International Executive Master of Business Administration Program Page GRADUATION THESIS 5.4 Data researched on Internet under verified documents Structure of the thesis: the thesis includes 03 chapters and the introduction as follows: INTRODUCTION CHAPTER 1: Theory base on the project investment and analysis CHAPTER 2: introduce about Bac Kan soft iron production factory project CHAPTER 3: Analyze and evaluate economic – financial effects of Bac Kan soft iron production factory project Conclusion and suggestions: Student’s thesis is one actual project which is being invested by Matexim Company The research shows which key phase is leading to one effective project, which is key phase leading to bad effective or non effective one for the investor to have more views on project’s future Our students expect to receive suggestions from professors of the course and especially from Associate Professor Dr Tran Van Binh – the thesis instructor for the thesis to be better and be applied successfully in the actual case Respectfully thanks! International Executive Master of Business Administration Program Page GRADUATION THESIS 1.2 Contents of the project feasibility study 1.2.1 Feasibility Study: Is the last screening step to select the optimal project, this stage is to confirm the investment opportunity feasible, solid, and effective or not? In this step of study, the study content is similar to the pre-feasibility study stage, but they differ in more detailed and accurate level All aspects of the study are considered in the active state, i.e taking into account the uncertainties that can occur on the contents of the study Considering the solidity of the project in terms of the impact of the uncertainties, or it may have any impact measures is to ensure effective project 1.2.2 Nature and purpose of feasibility study Nature of feasibility study: In terms of form, the feasibility study document is a collection of records presenting in a detailed and systematic manner the solidity and the reality of a business production activity and the socio-economic development in the aspects of market, technique, finance, organization, and socio-economic management In our country, the feasibility study is often called as the economic-technical arguments The feasibility study is conducted based on the results of studies on investment opportunities and pre-feasibility study accepted by the competent authorities At this stage of feasibility study, the project is drafted more carefully to ensure that all expectation and calculation must be achieved at a high level of accuracy before submitting to planning, financial, and banking agencies and the international financial institutions for evaluation Purpose of feasibility study: The feasibility study process is conducted in three stages The stage of investment opportunity study is aimed at removing immediately the clearly unfeasible projections despite of being without going into details The unfeasibility is demonstrated by statistics and easily findable material economic information It helps to save time, and costs for the next studies The purpose of feasibility study is to consider the last time to reach accurate conclusions about all the basics of the project through carefully calculated and International Executive Master of Business Administration Program Page GRADUATION THESIS amount I Pre-investment period 722.461 Plan investment project 250.000 Evaluate investment project Report DTM 200.000 Geological survey 242.461 II Investing period Construction 30.000 9.245.637 technical 2%*115.110.000 2.320.200 design 0,13% *115.110.000 149.643 budget 0,13% *115.110.000 149.643 bidding 0,1% *115.110.000 115.110 design cost Construction verification Construction verification Construction consulting Facility bidding consulting 155.000 Construction supervision 1,65% *115.110.000 1.899.315 Facility installation 0,37% * 335.000.000 1.184.000 Project management cost: 1,32% * 2.970.726 supervision 1,32% (XD+TB)*50% Static pile compression cost 450.110.000*0,5 20*15.000 300.000 Total 20.000 (all construction items) 20 piles 10 Verification of facility bidding results III Ending period Budget 2.935.473 approval 0,07% *450.110.000 315.077 International Executive Master of Business Administration Program Page 55 GRADUATION THESIS verification(Total) Auditing Construction and facility 0,12% * 450.110.000 540.132 0,24% *450.110.000 1.080.264 Total 1.000.000 insurance Training worker Total 12.903.571 International Executive Master of Business Administration Program Page 56 GRADUATION THESIS CHAPTER III ECONOMIC AND FINANCIAL BENEFIT ANALYSIS OF INVESTMENT PROJECT OF BAC KAN SPONGE IRON FACTORY 3.1 Total capital: 549.637.000.000 VND With: + Fixed capital: 519.637.000.000 VND + Working capital: 30.000.000.000 VND 3.2 Source of capital: + Owner capital 30% 155.891.100.000 VND + Bank loan 70% 363.745.900.000 VND + Interest rate of the first years: 6, 5%/year, years after that: 12%/year 3.3 Production plan: 3.3.1 Capacity and output:According to project reality inspection, data obtained from project owners, it is expected that the factory will go into operation in th quarter of 2012 and official production process will start in 2013 The estimated capacity: + In the 1st year (2013): 65.000 ton/year, equal to 65% designed capacity + In the 2nd year (2014): 75.000 ton/year, equal to 75% designed capacity + Since (2015): 100.000 ton/year, equal to 100% designed capacity 3.3.2 Demand for material: To reach the expected capacity, the demand for material is supposed to be at the level: Table3.1 Main material for production: No Items Unit Year Year Year Iron ore Ton 120.000 136.000 160.000 Reverting coal Ton 33.750 38.250 45.000 Coal gasification Ton 37.500 42.500 50.000 Limestone Ton 7.500 8.500 10.000 International Executive Master of Business Administration Program Page 57 GRADUATION THESIS Refractories Ton 450 510 600 Electricity KWh 9.000.000 10.200.000 12.000.000 Water M3 150.000 170.000 200.000 Other material % 2 * Material supply source - Iron ore Iron ore for sponge iron production in tuynel furnace with AMR-CBI technology has to have these technical features: TFe ≥ 60% S  0,15% P ≤ 0,1% As  0,1% andPb 0,1% About the quantity demand: For the 1st year: 120.000 ton, for the 2nd year: 136.000 ton and since the 3rd year, each year needs: 160.000 ton With the stated demand, Matexim Company absolutely can supply sufficient amount because the company is exploiting iron mines at Ban Cuon and Ban Quan with the output of 200.000 ton/year - Coalused as reverting substance Quality of coal used as reverting substance should be: C ≥ 70% Tro 15% Grain size 0,247 mm About quantity demand, for the 1st year: 33.750 ton, for 2nd year: 38.250 ton and since 3rd year, each year needs 45.000 ton Given the quality and quantity demand, the coal exploitation branch at Thai Nguyen (Nui Hoang mine, KhanhHoa mine…) or BacKan can ensure the stable supply - Coal for gasification: Quality requirement International Executive Master of Business Administration Program Page 58 GRADUATION THESIS Grain size: 25 – 60 mm Can use agglomerated coal Heating value: ≥ 6.500 Kcal/kg Melting point: 1250˚C Thickness of adhesive layer:  mm S content:  0,5% About quantity demand, for the 1st year: 37.500 ton, for the 2nd year: 42.500 tonand since the 3rd year, each year needs: 50.000 ton Given the quality and quantity demand, the coal mine at Thai Nguyen and BacKan can ensure the supply - Limestone: This material is used for desulphurization process The quality requirement: CaO ≥ 50% Grain size:  0,247 mm About quantity demand, for the 1st year: 7.500 ton, for the 2nd year:8.500 tonand since the 3rd year, each year needs: 10.000 ton Given the quality and quantity demand, the limestone exploitation branches at BacKan can ensure the supply - Refractories: This material is used to build Tuynel furnace and be supplied by facility suppliers (in the facility and equipment package) The demand for the st year is 450ton, for 2nd year: 510 ton, for the next years: 600 ton, which will be bought from domestic manufacturers at Thai Nguyen, Cau Duong, BacNinh The refractory for building reverting tanks will be purchased from facility suppliers Since then refractory can be bought domestically or recycle - Electricity: When reaching 100% production capacity, each year the factory needs 12.000.000 kWh electric power Knowing the demand, the factory plans to build a voltage generator station 2.000 kVA Moreover, the factory locates in ThanhBinh industrial zone;BacKanElectricity Corporation favors the best conditions for factory operation - Water supply: The demand for water is quite low; the high demand is for coal gasification process With 100% designed capacity, each year the factory International Executive Master of Business Administration Program Page 59 GRADUATION THESIS consumes200.000 m3 water/year, equal to 25 m3/hour The factory builds a pumping station to meet up the technical demand for production process 3.4 Production cost: Base on labor organization chart, the total salary payment/month is calculated on table 3.2 Base on the material consumption demand and salary payment, the working capital requirement/month in 2013, 2014, 2015 can be calculated: Table 3.2 Salary payment/month No Tittle Unit: 1.000 đ Number Salary/person Money amount I Director board Director 30.000 30.000 Deputy director 25.000 50.000 II Technical 15.000 60.000 12.000 48.000 departments Department manager Department deputy manager Officer 28 8.000 224.000 Security staff 12 3.000 36.000 III Workshop Workshop 15.000 60.000 12.000 72.000 Worker 164 3.500 574.000 Total 225 manager Workshop deputy manager 1.154.000 + Annual salary payment: 1.154.000.000 VND/month x 12 months = 13.848.000.000 VND International Executive Master of Business Administration Program Page 60 GRADUATION THESIS + Bonus amount= month salary: 1.154.000.000 VND + Total annual salary payment: 15.002.000.000 VND Insurance: Insurance cost (Social insurance, medical insurance, labor accident insurance) and union cost) are equal to 21% total salary payment: 13.848.000.000VND x 21% = 2.908.080.000 VND Table3.3 Capital investment/month in 2013Unit: 1.000 VND No Items Amount Price Money amount Iron ore 10.000 ton 2.000 20.000.000 Coal 5.937,5 ton 961 5.705.937 Limestone 625 ton 1.160 725.000 Refractories 37,5 ton 403 15.113 Electricity 2,3 1.725.000 750.000KWh Salary+ Insurance Other month 1.492.506 2% 593.271 Total 30.256.827 Table 3.4.Investment capital in 2014Unit: 1.000 VND No Items Iron ore Coal Amount Price Money amount 11.333 ton 2.000 22.666.000 6.729 ton 961 6.466.569 Limestone 708 ton 1.160 821.280 Refractories 425 ton 403 17.128 Electricity 2,3 1.955.000 850.000KWh International Executive Master of Business Administration Program Page 61 GRADUATION THESIS Salary+ Insurance Others month 1.492.506 2% 668.369 Total 34.086.852 Table 3.5 Investment capital in 2015Unit: 1.000 VND No Items Amount Iron ore Coal Limestone Refractories Electricity Salary+ Insurance Others Price Money amount 13.333 ton 2.000 26.666.000 7.916 ton 961 7.607.276 834 ton 1.160 967.440 50 ton 403 20.150 2,3 2.300.000 1.000.000KWh month 1.492.506 2% 781.067 Total 39.834.439 3.5 Estimated project revenue The price of sponge iron on December 2012 is: 9.000.000 VND/ton; expected price in 2013 is 9.000.000 VND/1ton; in 2014 and 2015: 9.500.000 VND/1ton The revenue of years as follow: Table 3.6 Estimated revenuesUnit: 1000VND Period Item Year 2013 Year 2014 Year 2015 Year 2016 1.Amount 65.000 ton 75.000 ton 100.000 ton 100.000 ton Price 9.000.000 9.500.000 9.500.000 9.500.000 585.00.000 655.000.000 950.000.000 950.000.000 3.Domestic revenue International Executive Master of Business Administration Program Page 62 GRADUATION THESIS 3.6 Interest and loan payment plan: According to the loan contract between Matexim Company and VDB bank, in the first years, the interest cost will be 6.5%/year and after these years, it will be 12%/year Loan payment period starts from 31/12/2013 Bảng 3.7 Interest and loan payment plan Unit: 1000đ Year Item 2013 Beginning 2014 2015 2016 2017 363.745.900 290.996.720 218.247.540 145.498.360 72.749.180 balance Periodic 23.643.483 18.914.786 26.189.704 17.459.803 8.729.901 72.749.180 72.749.180 72.749.180 72.749.180 72.749.180 290.996.720 218.247.540 145.498.360 72.749.180 interest Loan payment Ending balance 3.7 Cash flow of project: 1.Revenue Other revenue 3.Investment capital Fixed capital Working capital Annual operating cost Unit: Billion VND 585 655 950 950 950 950 950 950 10 950 950 30 549,64 519,64 30 363,1 409 478 478 478 478 478 478 478 478 5.Depreciation 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 6.Interest cost 23,6 18,9 26,2 17,5 8,7 0 0 398,8 402,5 411,3 420 420 420 420 420 99,7 100,6 102,8 105 105 105 105 7.Taxable income Corporate tax 146,3 36,6 175,1 43,8 105 International Executive Master of Business Administration Program Page 63 GRADUATION THESIS After tax income 109,4 131,3 299,1 301,9 308,5 315 315 315 315 315 0 0 0 0 0 202,2 377,3 371,5 369,2 367 367 367 367 397 10.Additional investment 11 Project cash flow -549,64 185 12 NPVn -549,64 167,3 165,3 252 216,9 188,4 163,7 143,1 125,1 109,4 103,4 13 Accumulated profit -549,64 -382,3 -217,0 34,96 251,86 440,26 604 747,1 872,2 981,6 1084,9 Discounted interest cost: - The first years: R01 = 0,065*0, +0, 2*0, = 0,106 - Other years: R03 = 0, 12*0, 7+0, 2*0, = 0,144 3.8 Economic- Financial analysis: (NPV, IRR, B/C, Break-even period) - Break-even period: T= + 34, 96*12/252 = years10 months - Net present value of project: NPV =1.084,9 - With r1 = 0,45  NPV1 = 48 - With r2 = 0,5 NPV2 = -18,2 - IRR = r1 + NPV1/( NPV1-NPV2)*(r2-r1) = 0, 45 + 48/(48+18,2)*(0,5-0,45) = 0,486 - Benefit /Cost ( B/C): PV (B) = 4.387 billion VND PV(C) = 2.882,3 billion VND B/C = PV (B)/PV(C) = 4387/2882, = 1,522 - Break-even point: + Project output: 940 thousandton, Total project revenue: 8840 billion =>Average price: p = 8.840/940=9, + Total project cost: 4.596,1 =>Average cost: v = 4.596,1/940 = 4,9 Break-even quantity: X= f/ (p – v) = 519,637/ (9, – 4,9) = 115,5 thousand ton International Executive Master of Business Administration Program Page 64 GRADUATION THESIS 3.9 Project scenario analysis: * When annual operating cost increases 15%, the cash flow table changes as followed: Unit: Billion VND 1 Revenue 585 655 950 950 950 10 950 950 950 950 Other revenue Investment capital Fixed capital Working capital Annual operating cost 5.Depreciati on 6.Investment cost 7.Taxable income Corporate tax 30 549,64 519,64 30 417.565 470.35 549.7 549.7 549.7 549.7 549.7 549.7 549.7 549.7 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 23,6 18,9 26,2 17,5 8,7 0 0 91,9 113,8 322,1 330,8 339,6 348,3 348,3 348,3 348,3 348,3 22,9687 28,4475 80,535 82,71 84,91 87,085 87,08 87,08 87,08 87,08 68,90625 85,3425 241,60 248,1 254,7 261,255 261,25 261,25 0 0 0 0 261,2 261,2 -549,64 144,47 156,20 319,77 317,6 315,4 313,22 313,2 313,2 313,2 343,2 12 NPVn -549,64 130,62 127,70 213,58 185,4 160,9 139,73 122,1 106,8 93,33 89,39 13 Accumulate d profit -549,64 -419,02 -291,32 -77,74 107,7 268,6 408,37 530,5 637,2 730,6 820,0 After tax income 10Additiona l investment 11 Project cash flow - Net present value of project income: NPV = 820 R1=40%  NPV1= 10,654 R2=45%  NPV2= - 57,395 IRR= R1 + NPV1*(R2 – R1)/ (NPV1-NPV2) = 0,4+10,654*(0,45-0,4)/(10,654+57,395)=0,4078 So when the project cost increases by 15%, the project still generates profit International Executive Master of Business Administration Program Page 65 GRADUATION THESIS  Whenrevenueof project decreases by 15%:Unit: Revenue Other revenue Investme nt capital Fixed capital Working capital Annual operating cost 5.Deprec iation 6.Invest ment cost 7.Taxabl e income Corporat e tax After tax income 10Additi onal investme nt 11 Project cashflow 12 NPVn 13 Accumul ated profit 497,25 556,75 807,5 807,5 Billion VND 807,5 807,5 807,5 807,5 10 807,5 807,5 30 549,64 519,64 30 363,1 409 478 478 478 478 478 478 478 478 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 51,96 23,6 18,9 26,2 17,5 8,7 0 0 58,6 76,9 251,3 260,0 268,8 277,5 277,5 277,5 277,5 277,5 14,647 19,222 62,835 65,01 67,21 69,385 69,385 69,385 69,385 69,385 43,942 57,667 188,505 195,03 201,63 208,15 208,15 208,15 208,15 208,15 0 0 0 0 0 -549,64 119,50 128,53 266,67 264,49 262,29 260,12 260,12 260,12 260,12 290,12 -549,64 108,05 105,07 178,11 154,42 133,86 116,04 101,43 88,67 77,51 75,56 -549,64 -441,59 -336,5 -158,41 -3,99 129,87 245,92 347,35 436,02 513,52 589,08 -Project net present value: NPV = 589,08 - Break-even period T = years + 3,99*12/133,86 = years months R1=30%  NPV1=75,768 R2=35%  NPV2= - 13,816 - Internal rate of return IRR 0,3+75,768*(0,35-0,3)/(75,768+13,816) = 0,3423 So the project still generates profit when revenue decreases by 15% International Executive Master of Business Administration Program Page 66 GRADUATION THESIS CONCLUSION AND RECOMMENDATIONS * Conclusion: The thesis serves for the purposes: - Give an honest and subjective view about the profit possibility of the project so that the project owner can make reference to have a better project management quality - Project owner should know how successful this project can be and how much capital is needed for each investment period, which will help them to minimize project investment cost - This thesis is completed on the basis of reference to fundamental economic theory taught at MBA course, other relevant documents and individual experience accumulated in the time of working with Matexim Company With the enormous support and careful guide of associate professor, PhD TrầnVănBình , the thesis is finished to provide the readers some useful knowledge of project management and mineral resource production project in particular Hopefully, this document can provide the objective view for Matexim Company about their investment project * Recommendations: Personally I think that to avoid the failure and capital loss of investment projects, any big project should be more carefully considered the operating possibility and profitability before the government authority approves the investment project and release investment certificate Thank you for your interest and consideration! Hanoi,… October 2012 Student: ĐặngHữuKỳ International Executive Master of Business Administration Program Page 67 GRADUATION THESIS Reference documents - Investment Law No 59/2005/QH 11, approved by Vietnam National Assembly on 29/11/2005 andDecree No 108/2006/NĐ-CPon 22/9/2006 , Government instructed to enforce Investment Law; - Construction Law No 16/2003/QH 1, approved by Vietnam National Assembly on 26/11/2003; - Decree No 12/2009/NĐ-CP on 12/02/2009, Government regulated the project management and construction site; - Circular No 02/2007/TT-BXD on 14/02/2007, Ministry on construction instructed to establish, evaluate and approve the construction project, construction certificate, construction project management; - Decree No 209/2004/NĐ-CP on 16/12/2004,Governmentregulated quality control of construction building; - Decree No 99/2007/NĐ-CP on 13/6/2007,Government regulated the cost management of construction buildings; - Decree No 03/2008/NĐ-CP on 07/01/2008, Governmentamended some terms of Decree No 99/2007/NĐ-CP on 13/6/2007; - Decision No 345/2007/QĐ-TTgon 04/9/2007, President approved the plan of developing the steel industry in period of 2007-2015, regarding to 2025; - Environment protection Law 28/8/2005, DecreeNo 63/2008/NĐ-CP on 13/5/2008 Governmentinstructed to enforce environment protection Law; - Business registration certificate No 0103017766, released by Hanoi Planning and Investment department the 2nd time for Matexim Company; - Decision No 685/GP-UBND on 11/4/2006, BacKan’s people committee approved that the Matexim Company can exploit iron ore at Ban Cuon (Ngoc Phai town, Cho Don district); - The license to research the iron mine Ban Quan, released by Ministry of natural resource and environment; International Executive Master of Business Administration Program Page 68 GRADUATION THESIS - Notification No 92/TB-UBND on 29/8/2008, BacKan’s people committee approved Matexim Company to build the sponge iron factory at ThanhBinh industrial zone, Cho Moi district; - Report No 06-BB/HĐQT on 15/9/2008, shareholder board of Matexim Company approved to build sponge iron factory with production capacity of 100.000 ton/year; - Economic contract No 18-3/09, signed on Matexim Company and 1Black Metallurgy Institute about investing to construct the sponge iron factory with capacity of 100.000 ton/year at BacKan; - Other relevant legal documents International Executive Master of Business Administration Program Page 69 ... GRADUATION THESIS TABLE OF CONTENT INTRODUCTION 1 Name of thesis: Analysis and evaluation on effects of “Bac Kan soft iron production factory” project 2 Reason of choosing... Name of thesis: Analysis and evaluation on effects of “Bac Kan soft iron production factory” project Reason of choosing this thesis: According to the statistics of Investment and planning Ministry,... iron ore exploitation and investment projects and soft iron production factory in Bac Kan This is one big and daring project of the company that decides survival and business strategies in long