1. Hotmall Limited is a well known Retail manufacturer. There is the opportunity for Hotmall Limited...

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1. Hotmall Limited is a well known Retail manufacturer. There is the opportunity for Hotmall Limited to enter into new overseas market that is eager for Australian goods. To assist in understanding this opportunity i have commissioned a $400,000 ( sunk cost T) report into the viability of a new vehicle that will allow for higher levels of transportation. 2. The new vehicle has been valued at $120,000 and a further $20,000 is required for the licence. 3.The vehicle is expected to meet Our Company's needs for 5 years but the Taxation Office advises the machine has an operational life of 6 years. 3. The new project will require Our Company to park the new vehicle in a storeroom of our building that is currently being rented out to a separate business. The rent that Our Company currently receives is $98,000 a year. 4. There is also an existing vehicle from a previous project that has a written down value of $6,000. You were recently offered $9,000 to sell this asset but you believe that it can also be used in the new project. At the end of this project the machine will be discarded. 5. With increased output Your Company needs additional inventory of $10,000. 6. Revenue related to this project is expected to be $500,000 in the first year and grow by 10% each year for the remainder of the project. 7. Material costs are expected to be 25% of sales in each year. 8. An advertising spend of $20,000 is expected in order to develop the Chinese market in the first year. 9. The cost of labour from a retail goods factory in Australia to the local Chinese market is in the region of $5,000 per year. 10. The new vehicle will be sold at the end of the fifth year for a value of $16,000. Step 1: Performing your Capital Budgeting analysis Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Total Net Cash Flow After Tax Present Value NPV Step 2: Providing your Payback period cash flow analysis Analysis: Step 3: Providing your recommendation and reasons Recommendation : Reason: Reason: Step 4: Providing your group contribution Partner Contribution Name / Student # Name / Student # Name / Student # % % % 1. Hotmall Limited is a well known Retail manufacturer. There is the opportunity for Hotmall Limited to enter into new overseas market that is eager for Australian goods. To assist in understanding this opportunity i have commissioned a $400,000 ( sunk cost T) report into the viability of a new vehicle that will allow for higher levels of transportation. 2. The new vehicle has been valued at $120,000 and a further $20,000 is required for the licence. 3.The vehicle is expected to meet Our Company's needs for 5 years but the Taxation Office advises the machine has an operational life of 6 years. 3. The new project will require Our Company to park the new vehicle in a storeroom of our building that is currently being rented out to a separate business. The rent that Our Company currently receives is $98,000 a year. 4. There is also an existing vehicle from a previous project that has a written down value of $6,000. You were recently offered $9,000 to sell this asset but you believe that it can also be used in the new project. At the end of this project the machine will be discarded. 5. With increased output Your Company needs additional inventory of $10,000. 6. Revenue related to this project is expected to be $500,000 in the first year and grow by 10% each year for the remainder of the project. 7. Material costs are expected to be 25% of sales in each year. 8. An advertising spend of $20,000 is expected in order to develop the Chinese market in the first year. 9. The cost of labour from a retail goods factory in Australia to the local Chinese market is in the region of $5,000 per year. 10. The new vehicle will be sold at the end of the fifth year for a value of $16,000. Step 1: Performing your Capital Budgeting analysis Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Total Net Cash Flow After Tax Present Value NPV Step 2: Providing your Payback period cash flow analysis Analysis: Step 3: Providing your recommendation and reasons Recommendation : Reason: Reason: Step 4: Providing your group contribution Partner Contribution Name / Student # Name / Student # Name / Student # % % %