Question

A. Plant Production, Costs, and Investment Model
Given below are the most important parameters for a model plant that are based on the data for the existing successful plant:
• The annual production capacity is 3 million square meters of tile
• The total unit production costs are $4.80 per square meter
• The applicable tax rate is 35% (includes all taxes to be considered)
• The cost of equipment is $15 million; the equipment is depreciated on the basis of the straight-line method with the useful life of 10 years and zero salvage value
• It takes 18 months for a plant to reach full capacity
• The initial investment (made in the very beginning of the project implementation) is estimated at $14 million; an additional $3 million must be invested next year
• After 10 years, the plant will require similar investments to continue its operations
B. Market Forecast and Tile Prices
Based on the market analysis and industry trends, the following forecasts have been made with respect to the revenues generated by the plants:
• All manufactured volumes for as many as 5 plants of a described capacity can be easily swallowed by the market without any downward influence on prices
• The current selling price of the tile is $6.60 per square meter (the base scenario)
• The strong and growing demand may push the prices up to $7.20
• At the same time, there exists a threat of a downward pressure on prices due to the active invasion of Chinese manufacturers; still, the lowest price boundary is $ 6.00
C. Investment Criteria
The investment decision is made on the basis of NPV and IRR criteria (which in this model lead to similar conclusions).
The minimum required rate of return is 20%
Given one plant is a good investment, the scaling-up may proceed in two modes:
• The building of all 5 plants simultaneously
• Building one plant each two years (the first one is started right now, the last one – at the beginning of Year 8)
(*) Based on the real case from the instructor’s consulting practice.
Case Assignment
less
You have to build the valuation model for one plant and study the sensitivity of the plant value with respect to:
• Product selling prices (the basic price is $6.60 per square meter; you study the moves of +/– $0.60)
• Discount rates (in the range from 15% to 25%, at a step of 5%)
Then you have to expand the model to study the scaled-up project of building 5 plants either at once or sequentially.

Answer 1

Answer:

知りません

Explanation:

知りません知りません知りません

Answer 2

Answer:

Depreciation a/c. Dr. 200

to machinery a/c. 200