Analyzing and evaluating the results of the investment project for an phat steel structure factory

Paris Graduate School of Management

Thai Nguyen University

INTERNATIONAL EXECUTIVE
MASTER OF BUSINESS ADMINISTRATION PROGRAM

THESIS TITLE:

ANALYZING AND EVALUATING THE RESULTS OF THE
INVESTMENT PROJECT FOR AN PHAT STEEL STRUCTURE
FACTORY
Investor
Place
Total sum
Land leasing square

: An Phat Joint Stock Company
: Khai Quang Industrial Zone – Vinh Yen – Vinh Phuc
: 69.000.000.000 VND
: 13.000 m2

Student’s name:

NGUYEN QUANG HAI

Intake I

11/2012

Investment project for An Phat steel structure factory

CERTIFICATION
MAKE SELECTION COMPANY PROJECT GRADUATION THESIS

Name

: An Phat Group Joint Stock Company.

Office Address: No. 1 Cu Loc street, Thuong Dinh Ward, Thanh Xuan District,
Hanoi city.
Phone

: (+84) 35569968 - (+84) 35569969.

Fax

: (+84) 35569959.

Web site

: www.anphatgroup.com

Email

:

An Phat Group Joint Stock Company confirm: Nguyen Quang Hai is attending training
programs of international master's degree in business administration selected PGSM now
in graduate thesis. entitled, “Analyzing and evaluating the results of the

investment project for An Phat Steel Structure Factory”.
An Phat Group Joint Stock Company confirm all data used in the analysis of his thesis
Nguyen Quang Hai is completely authentic and accurate. Management company also
highlights the practical value of this research.

AN PHAT GROUP JOINT STOCK COMPANY.

-----------------------------------------------------

DEPUTY DIRECTOR GENERAL :
LE VAN CHUONG
Students: Nguyen Quang Hai - ieMBA B01


Investment project for An Phat steel structure factory

ACKNOWLEDGEMENTS
To complete the high school program and writing this thesis, I have received the
guidance, help and suggestions Your enthusiastic teacher Thai Nguyen University Thai
Nguyen city.
First of all, I would like to send my deep gratitude to Dr. Tran Van Binh, the Institute
of Economic Management - University of Technology, Hanoi has spent a lot of time and
diligence study guide and help me complete thesis.
Sincerely thank would like to thank the teachers, the teachers University of
Management Paris France (PGSM), Thai Nguyen University, the training of the company
.... organized a science and to teach and communicate knowledge is very precious and
very practical in 12 subjects of the program, have created the conditions for me to study
and complete the course.
At the same time, I also thank you brother, sister and leadership An Phat Group Joint
Stock Company, the Department of Planning and investment, department of of Vinh

Phuc ..... tax facilitate our survey to essay writing data.
Sincere thanks members in Grades IeMBA.b01, the most enthusiastic comments when I
talk and help me in the learning process and completion of this thesis.
Although I have tried to complete the thesis with all his enthusiasm and energy, but the
inevitable shortcomings, look forward to the valuable contribution of you and teachers .
Ha Noi, November 2012.

------------------------------------Student : Nguyen Quang Hai

Students: Nguyen Quang Hai - ieMBA B01


Investment project for An Phat steel structure factory

WORDS WARRANTIES
I swear this is my own work. The data and results described in the thesis is true and who
never published in any other work.
Ha Noi, November 2012.

------------------------------------Student : Nguyen Quang Hai

Students: Nguyen Quang Hai - ieMBA B01


Investment project for An Phat steel structure factory

TABLE CONTENTS

Page

FOREWORDS
1. Title: Analyzing and evaluating the results of the investment project for An
Phat Steel Structure Factory...................................................................................................1
2. Rationale: ...........................................................................................................................1
3. Aims..................................................................................................................................2
4 Research methodology......................................................................................................2
5 Research data ....................................................................................................................2
6. Organization.....................................................................................................................2
7. Conclusion .........................................................................................................................3
CHAPTER I .........................................................................................................................4
1.1

The general concept of investment projects ....................................................................4

1.1.1 The concept of investment projects .......................................................................4
1.1.2

Classification of investment projects.............................................................4

1.1.3 The periods of investment project .........................................................................6
1.2 Content of feasibility studies ..............................................................................................10
1.2.1 Feasibility study...................................................................................................10
1.2.2 The purpose of the feasibility study ....................................................................10
1.2.3 Main contents of the feasibility study: ................................................................11
1.3. Finance and Economic analysis of investment projects ................................................14
1.3.1. Investment identification ....................................................................................14
1.3.2. Estimating annual turnover of project ................................................................16

Students: Nguyen Quang Hai - ieMBA B01

Investment project for An Phat steel structure factory
1.3.3. Estimating the annual cost of the project............................................................17
1.3.4 Tabulate the basic parameters of the project ......................................................18
1.3.5 Preparation of expected financial reports ...........................................................18
1.3.6 Evaluation of the project......................................................................................24
1.4 Sensitivity Analysis .............................................................................................................31
CHAPTER II......................................................................................................................33
2.1 The need for the construction of structural steel plant in the area ................................33
2.2 Introduction about the investor ..........................................................................................33
2.3 Pursuant to the implementation of the project .................................................................34
2.4 Description of the investment project ...............................................................................35
2.4.1 Design capacity....................................................................................................35
2.4 .1.1.Installed Capacity........................................................................................35
2.4 .1.2.Features .......................................................................................................35
2.4.2 Technology ..........................................................................................................36
2.4.3 Location, area and scale construction ..................................................................37
2.4.4 Equipment List ....................................................................................................39
2.4.5 Construction Category.........................................................................................41
2.4.6 The total project construction and installation of equipment ..............................44
2.5 The organizational model of production ...........................................................................45
2.5.1 The organizational model business......................................................................45
2.5.2 Forecast of labor ..................................................................................................47
2.5.3 Expected production plan ....................................................................................48
2.5.4 Estimation on manufacturing cost and product price ..........................................50

Students: Nguyen Quang Hai - ieMBA B01


Investment project for An Phat steel structure factory

2.5 .4.1.Cost estimates for the first five years:.........................................................50
2.5 .4.2.Estimation of production costs: ..................................................................51
CHAPTER III ....................................................................................................................52
3.1 The production plan and projected revenues, production costs .....................................52
3.2 Plan to raise capital for the project ....................................................................................60
3.3 Plan of the interest payments and loan ..............................................................................62
3.4 Establishment of the project's cash flow table ...............................................................64
3.5 Calculate indicators NPV, IRR, payback period of the project ...................................66
3.6 Sensitivity analysis with the assumption ..........................................................................68
3.6.1 Costs raise by 5% ................................................................................................68
3.6.2 Revenue decreased by 5% ...................................................................................70
3.7. Conclusions on the feasibility of the project ...................................................................73
3.8. Conclusions and recommendations .................................................................................74

Students: Nguyen Quang Hai - ieMBA B01


Investment project for An Phat steel structure factory

LIST OF TABLES

Page

Table 1: Regional climate project ........................................................................................38
Table 2: List of equipment...................................................................................................39
Table 3: The estimated capital construction work items .....................................................43
Table 4: Estimates of investment and construction equipment ...........................................44
Table 5: Structure of the apparatus and the number of employees ......................................47
Table 6: The first 5-year cost estimate.................................................................................50
Table 7: estimates of production costs.................................................................................51

Table 8: Estimated revenue: ................................................................................................53
Table 9: Revenue for the first 15 years of operation from the corresponding with operation
of the plant: (unit: Million VND) ........................................................................................53
Table 10: Cost of the average wage the first five years of production ................................54
Table 11: Depreciation of items in 15 years ........................................................................55
Table 12: Cost of production for 15 years ...........................................................................57
Table 13: Fixed capital investment ......................................................................................60
Table 14: Mobile capital ......................................................................................................60
Table 15: General investment ..............................................................................................62
Table 16: Capital structure...................................................................................................62
Table 17: Interest payment plans and loans bank (unit: MillionVND) ...............................63
Table 18: Cash flow of project (Unit: Million VND) ..........................................................64
Table 19: The break-even point of the project.....................................................................67
Table 20: Sensitivity analysis of the cost increasing by 5% (unit: Million VND) ..............68
Table 21: Sensitivity of the project while revenue fell 10% (Unit: MillionVND) ..............70

Students: Nguyen Quang Hai - ieMBA B01


Investment project for An Phat steel structure factory

LIST OF ABBREVIATIONS
CB: Being cash
AR: Receivables
AP: Payables
AI: In Stock
EBT: Earnings before tax
EBIT: Earnings before interest and taxes payable
NPV - Net Present Value: the net present value index
Bi - Benefit: The benefits of the project

Ci - Cost The cost of the project
r: discount rate
AV - Annual Value: Annual Target current value
B / C - Benefit / Cost: The ratio of benefit / cost
IRR - Internal Rate of Returns: the internal rate of return
KH: Depreciation and amortization
Bd: Maintenance
PP - Payback method: return on investment time
Fe: Iron
Si: Silicon
Mn: manganese
P: Phosphorus
S: Sulfur
C: Carbon
Cr: Chromium
RC: Reinforced concrete
IZ: Industrial
YT: Health
VLD: Working capital
VCD: Fixed capital
NVLC: Main materials
NVLP: Material subDT: Revenue

Students: Nguyen Quang Hai - ieMBA B01


Investment project for An Phat steel structure factory

FOREWORDS
1. Title: Analyzing and evaluating the results of the investment project for An

Phat Steel Structure Factory
2. Rationale:
Investment activity is first and foremost decision affecting to the development
and potential growth of the business. Investment activities are focused through the
implementation of investment projects. Efficient investment projects will benefit
long-term for business, helping businesses develop by leaps and bounds and meet
fierce changes of the market.
The decision to invest or not depends on other factors. The first factor is
economic policy, on the basis of the law and the state economic policy to create fair
playing field for all businesses. The second is the competitive market factors, to
survive and develop, products and services of the business have to meet needs of the
market. The third is the financial cost factors, changes in interest rates and tax
policies affect capital structure and the capital of the enterprise. Another factor that
has a big impact is the fourth element of scientific and technical progress. This
factor will affect the choice of equipment, depreciation of fixed assets, etc. The fifth
factor is the analysis of the project, assessment of the feasibility of the project. This
one is seen as the most important, having Crucial influence on investment decisions.
Currently

our

country

is

in

the

process

of

industrialization

and

modernization. The investment projects to build factories, industrial parks, export
processing zones, etc. is important because it produces local products to boost the
domestic economy, reduces imports and create jobs for employees in the
locality. The construction project requires big capital investment, long payback, so
the analysis and evaluation of its socio-economic effects must be very meticulous,
careful and accurate new, bringing high performance for the investment.
An Phat Group Joint Stock Company, is a corporation doing business in
multiple industries: industrial and civil construction, import and export, medical
equipment, education, mining and mineral processing… to develop the field of

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Investment project for An Phat steel structure factory

construction of industrial buildings, prefabricated steel building business in the
North, focusing mainly on the key provinces of the North West economy zone.
Recognizing the importance of the analysis and evaluation of the effectiveness of
investment projects for enterprises with the knowledge learned in the MBA program
and research results in business the author chose the subject “Analyzing and
evaluating the results of the investment project for An Phat Steel Structure

Factory” as his thesis.
3.

Aims
In this thesis, I apply the theory learned in the MBA program, the research

material to analyze, evaluate, study the factors related to the effectiveness of the
project and propose solutions guaranting for investment projects with efficiency,
limiting risk to the business, bringing significant profits and achieving their
business goals, contributing to improve the position of enterprises in the sector.
4 Research methodology
To complete this thesis, the author uses the methods learned in MBA
program such as statistics, market analysis, gathering data, processing data and
using data of consulting services in the technical stage. Since then draw the
conclusions on the basis processes: information collection - information processing
- forecasts of future market prices - solutions offer to find the optimal solution - the
conclusion
5 Research data
The data learned in MBA program will be used, especially on course of
Project Management, Corporate Finance, and Strategic Management. Besides, real
figures from a number of projects in domestic and foreign plants and data sources
from other specialized agencies are used as well. There is also the data looked up
from Internet network under verification.
6. Organization
Besides the forewords, conclusions and references, the structure of the thesis
consists of three chapters:

Students: Nguyen Quang Hai - ieMBA B01

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Investment project for An Phat steel structure factory

Chapter I: Theoretical background
Chapter II: Introduction of investment project for An Phat Steel Structure
Factory
Chapter III: The economic and financial analysis of investment projects
Due to time constraints, though getting the dedicated guidance of the Instructor
and the efforts of the author, the thesis can not avoid the shortcomings. Hoping that
the author could receive feedback from your teacher, and experts all friends.
7. Conclusion
Research is a real investment project of An Phat Group Joint Stock
Company. During study procedure, it will point out what is the key leading to
effective project, what is the key leading to poor or ineffective projects, so that the
investors have an additional perspective on the future of the project. We look
forward to the contribution of the faculty of the program and especially Associated
Professor Doctor Tran Van Binh.

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Investment project for An Phat steel structure factory

CHAPTER I
THEORETICAL BACKGROUND
1.1

The general concept of investment projects

1.1.1 The concept of investment projects
Investment activities (or “investment”) is the process of using the financial
resources, labor, natural resources and other physical assets in order to directly or
indirectly reproduce simply and reproduce extensively of production material and
technical base of the economy in general, of the Postage and Telecommunications
(MPT) in particular. Starting from the effective range of the investment results,
there may be different interpretations of investment.
Investment in a broad sense is the sacrifice of present resources to carry out
certain activities in order to return to investors expected results in the future which
is greater than the resources spent to achieve those results. Resources can be money,
natural resources, labor and wisdom. The results could be the increase of financial
assets, physical assets, intellectual property and resources.
Investment in the narrow sense includes only activities to use existing
resources in order to bring the socio-economic outcomes in the future which is
greater than the resources used to achieve these results
Thus, investment is active use of financial resources, material resources,
labor and intellectual resources in manufacture for a relatively long time to gain
economic benefits .

1.1.2

Classification of investment projects

Classification according to the investment management function


Direct investment: the investment method in which the investor directly

involve in managing capital spent. In direct investment, investor and the
manager of capital and is considered a subject. Direct investment can be

Students: Nguyen Quang Hai - ieMBA B01

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Investment project for An Phat steel structure factory

domestic investment or foreign investment in Vietnam. Investors are fully
responsible for investment results.


Indirect investment: is a method in which investors are not directly

involved in managing capital spent. In indirect investment, the investor and
manager of capital is not a subject. This type of investment is also known as
financial investments such as shares, securities, bonds, etc.


Loans: This is a form of loan as profit through interest on loans.

Classification by capital source:


Domestic investment: is the investment of finance into manufature by

Vietnam's business organizations, Vietnamese citizens, the Vietnamese
people residing abroad, foreigners permanently residing in Vietnam

.Domestic investment is subject to the Law of Domestic Investment.


Foreign investment in Vietnam: direct foreign investment in Vietnam,

(or “foreign investment” for short) happens when the foreign investors give
capital into Vietnam in cash or any other assets to carry out investment
activities in accordance with the Law on Foreign Investment in Vietnam.


Foreign investment: this is the kind of investment of one country's

institutions or individuals into others.
Classification according to investment properties:


Extensive investment (new investment): Investment for the

construction of buildings, factories, established companies, opening new
stores, new services. New investment is not on the basis of existing ones
which is growing up. This type of investment requires a lot of capital, high
technology and management; time of investment and the time required for
recovery operations is long, and it is high risk.


Intensive investment: this is the kind of investment to restore, renovate,

upgrade, refurbish, synchronize, modernize and expand of existing objects. It
is the method in which the investors directly involve in the management of
capital spent, it requires less capital, and time of recovery is fast.

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Investment project for An Phat steel structure factory

Classified according to time use:


Short-term investment



Medium-term investment



Long-term investment

Classified by sector of activity:


Investment for bussiness



Investment for scientific researches



Investment for management

Classified according to the nature of using capital:


Development investment: direct investment method, in which the

capital is given out in order to increase property values. This is the
fundamental mode to open extensive reproduction.


Shifting investment: direct investment method, in which the capital is

given in order to transfer ownership of assets (stock, bonds, etc.)
Classification according to majors:


Investment in infrastructure development: the investment to build the

technical infrastructure (transport, electricity, water, etc.) and social
infrastructure (schools, hospitals, cultural information base centre).
 Investment in industrial development: to build the industrial constructions
 Investment in service development: to build the service works ...
1.1.3 The periods of investment project

Prepar
Brainstor
-ming

(ideas)

ation

Action

Handling
the

New
ideas

results

Scheme of cycle to carry out investment project

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Investment project for An Phat steel structure factory

* Preparation: This stage creates the premise and decides the success of the
two later stages, especially of the result operational phase.To properly prepare the
investment will set the stage for the effective use of capital. With investment into
plant construction project, in this stage, capital usually takes about 0.2-0.3% of the
total funds invested and about 6 months, accounting for 25% of the investment
process.
The main content of this phase include:

- Identifying the needs of the market:
+ Current demand, future
+ Trend of demand
+ Product lifecycle...
- Detecting chance: opportunities can come
+ by chance,
+ from the assigned tasks
+ from partners, friends introduction or cooperation
+ from consulting services
+ But the most importance is from the process of self-study of the enterprises
on the basis of their own resources.
- Selecting chance
- Gathering information and data
+ about the macro and micro-environment,
+ about the sector environment
+ Internal information
-

Balancing the power, resources, or forming from the link itself to orient
investment

+ Financial resources, personnel
+ The superior resources
+ Resources formed from the link
-

Establishing investment projects

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Investment project for An Phat steel structure factory

+ Preparation of investment projects, financial calculations
+ Analysis, synthesis
+ Planning
Evaluation of investment decisions
-

Legal evaluation

-

Evaluating the market, provide

-

Evaluation resources

-

Evaluating technology

-

Evaluatinf economic efficiency

-

Evaluating fire-fighting

-

Evaluating the environmental impact

Formation of project management
- Establishing project management organization, assigning tasks
- Planning project
Conclusion: In this phase, the quality problems, the accuracy of the data is the most
important so that people can decide the scale of investment, suitable locations,
appropriate technology...
Stage of carrying out investment: investment capital of the project was spent at
most about 65-75% of the total capital of the project but not yet profitable. The
longer the investment period (about 60% of the time project) is, the more
accumulation of capital is, the greater losses. But the time of investing depends on
the quality of investment preparation, management process.
The main stages are:
-

Completing legal basis

-

Perfecting, supplementing, adjusting the project plan

-

Organizing to design-create the construction and technology estimates

+ Designing, estimating the construction
+ Designing, drafting the technology
+ Making the total cost estimates

Students: Nguyen Quang Hai - ieMBA B01

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Investment project for An Phat steel structure factory

+ Acquiring the investment agreements, construction permits
- Procurement organizations
+ Planning for bidding
+ Preparing bidding documents
+ Offering bid – marking bid
-

Implementation of investment

+ Negotiating and signing contracts with suppliers
+ Subscribing to supply contracts
+ Disbursing
+ Examining the stages
+ Trial running
Conclusion: In this phase, time is the most important issues, in parallel with a
reasonable cost, good product quality.
* Operation phase of investment results: Operation phase is to achieve the
purposes of the project. If the results produced by the investment phase ensure the

uniformity, low cost, right schedule..., the objectives of the project only depend on
issues of technology transfer and management ability. Duration of this stage is
about 15% of the total time of the project, the amount of capital to use is about 0.2%
of the total capital of the project.
The main stages are:
-

Operation with a capacity of lower than designed capacity

+ Completing the operating procedures
+ Training for operate
+ Increasing capacity up to approximate designed capacity
+ Calibrating errors
-

Operation with designed capacity

+ Operating with the maximum planning assumption
+ Calibrating
- Technology transfer

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Investment project for An Phat steel structure factory

+ Issueing the operating procedures
+ Completing the training, use

+ Partial technology transfer
+ Overall technology transfer
+ Commissioning put into operation, handing over to the customers
Conclusion: In this phase, the correction of discrepancies and mastering
technology are the most important, it determines the quality and efficiency of
investment projects.

1.2 Content of feasibility studies
1.2.1 Feasibility study
Feasibility Study is the last screening step to select the optimal project. In
this stage, it is obligatory to confirm whether the investment opportunity is viable or
not, solid and effective or not? In this study step, the research content is similar to
the pre-feasibility study phase, but differs in the level of detail and accuracy. All
aspects of the study are considered in the active state, which means we have to
taking into account the uncertainties which can occur in each content of the
study. We should consider the firmness of the project under the impact of the
uncertainties, or consider the impact to ensure effectiveness of project
1.2.2 The purpose of the feasibility study
The purpose of the feasibility study: The feasibility study was conducted in
three phases. Stage researches the investment opportunities in order to remove
unclear plan without going into details. The feature of unfeasibility is demonstrated
by the statistics, the easy-to-find economic information. It helps to save time and
cost of the next research.
The purpose of the feasibility study is considering the last time to reach accurate
conclusions about all the basics of the project by the data, techno-economic projects
specifications, schedules and project progress which have been carefully and
detailed calculated before formal investment decision.

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Investment project for An Phat steel structure factory

Thus, the feasibility study is one of the tools to implement the economic
plans of the industry, local and nation, to turn plans into concrete action, briging
economic and social benefits to country and financial benefits to investors.
1.2.3 Main contents of the feasibility study:
Considering the general economic situation relating to investment projects:
The general economic situation can be considered the basis of the investment
project. It represents the investment landscape which has a direct impact on the
process of economic development and financial efficiency of investment. The
general economic situation mentioned in the project includes the following aspects:
+ The natural geographical conditions (topography, climate, geology, etc.) relating
to the selection, implementation and com into effect of project later.
+ Conditions of population and labor relating to the demand and consumption
trends, to labor supply for the project.
+ Political situation, policies and laws that affect the concern of investors.
+ Socio-economic development situation of the country, of the local; the business
development of the branch, of the base (growth rate of GDP, investment-to-GDP
ratio, the relationship between savings and consumption, GDP per capita, rate of
return business, etc.) affecting the implementation process and the efficiency of the
project.
+ The situation of foreign exchange (foreign exchange balance, foreign reserves,
debt and debt payment situation ...), especially projects that have to import raw
materials and equipment.
+ Economic systems and policies include: System structure by Sector, by
possession relation, by region to assess the level and comparative advantage of the
investment project. The development policy, economic reforms and restructuring

assess the level of awareness, innovative thinking and an advantageous environment
for investment.
+ Status of national economic planning by period, by level of detail, by the
objectives, priorities, impacting tools from which to see the difficulties and

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Investment project for An Phat steel structure factory

advantages, priority that the project will be responded to, the limitations which the
project must comply.
+ The situation of foreign trade and other relevant institutions such as the import
and export, import and export taxes, exchange rate policy, the investment rules for
foreigners, the balance of trade, balance of international payments... These issues
are particularly important for projects producing goods for export and import of raw
materials and machinery. For example, the exchange rate policy is not appropriate
(the exchange rate of domestic currency is lower than of foreign currencies) will
cause more and more losses in export; export taxes are too high will cause
difficulties in competing with goods of countries in the overseas market, the rules
have the effect of encouraging investment and attracting foreign investment ...
The facts and data to study the general economic situation of the above projects can
be collected easily in almanacs, statistical reports, magazines, books and
international economy materials.
However, small projects do not need such many macro-economic data. With large
projects, it depends on the objectives, characteristics and scope of projects to select
among the general economic issues above to consider.
For all levels of project evaluation, macro-economic issues are considered

not only in the perspective of its impact on the project, but the project's impact on
the economy at the macro perspective such as socio-economic benefits, the project's
impact on the development of the economy, of the sector to economic structural
reform, economic development, foreign affairs ...
Market Research:
Market is the decisive factor in the selection of targets and the scale of the
project. Even in the case the project has signed the underwriting contract, market
also needs researching where the underwriting people sell their products and
reputation on the consumption market.

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Investment project for An Phat steel structure factory

Purposes of market research: in order to determine:
+ The market supply of products or services of the current project, the
development potential of this market in the future, the economic and non-economic
factors affect the demand for product or service.
+ The necessary promotional and marketing measures to be able to boost the
sale of products of the project (including pricing policies, organization, distribution,
packaging, decoration, advertising. ..)
+ The competitiveness of the product comparing to similar products
available and products which may be released later.
Content of market research:
- For the domestic market:
+ Current and future demand for products of the project. Who are the main
customers? Who are the new customers?

+ How current demand is met? (How many percent is locally produced and that of
other locations in the country, how many from import, imported from which region
in the world?);
+ Estimating increase annual demand from foreign countries for the products;
+ Estimating price and quality of the product, expected design, packaging ... to be
able to compete with other production facilities in and outside the country, in
present and future. In cases we have to compete with imports, which support of the
state the company needs? Costs required for this competition?
- For the export market:
+ The ability to compete in the export market in terms of price, style, and quality
depends on the supply of materials, financial capacity, technology and management.
+ The ability to expand export markets (in which sector, how much annual
volume? What should be done to expand the export market?)
+ Regulation of export market of packaging, quality and hygiene.
+ Wording consumption: how long? Consumption, prices?
+ Expected market to replace when needed.

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Investment project for An Phat steel structure factory

+ Which governmental support is needed to be able to export?
Consumption problem:
+ The shops for product marketing and distribution.
+ Expenses for marketing and distribution of products.
+ To whom product is expected to sell? (through trade system, directly sell, through
agents, etc.).

+ Method of payment: bank transfer, in cash;
Issue of competition:
-

Considering the domestic main competitive company now and in the future,
the situation and prospects of the operation of these facilities, comparable
benefits of the product produced by the project (cost of production, the type of
design, quality, etc.)

-

Consider the ability to win in the competition with imports, necessary
conditions?

1.3. Finance and Economic analysis of investment projects
1.3.1. Investment identification
* Investment identification needs doing each year and the entire project on the basis
of the progress of the plan proposed investment. Of the total investment, it is
necessary to separate groups:
- According to sources of capital: equity capital, loans (short-term, medium-term
and long-term interest rate for each source).
- The forms of capital: (Vietnam, foreign currency), in kind, with other assets.
The total investment capital of the project should be considered at each stage of the
investment process and is determined by the Vietnamese currency, by foreign
currency, or by other assets. The total investment of the project includes the entire
amount of capital needed to set up and put the project into operation. Total capital is
split into two categories: fixed capital and mobile capital.

Students: Nguyen Quang Hai - ieMBA B01

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Investment project for An Phat steel structure factory

- Fixed capital is the preparation expenses and the initial cost of investments in
fixed assets. These expenses are allocated to cost of products by annual
amortization
+ Preparation expenses are expenses arising before the operation of project. It
includes: establishment expense, costs for project researches, documenting,
browsing, initial managing (meetings, formalities,etc.), supply arrangement
relations, marketing ...It is difficult to calculate accurately this expens, so mostly,
we do not miss the detailed item and the budget for that item. These costs need to be
unanimously agreed upon by the parties to invest.
+ Initial cost of investment in fixed assets includes the original cost of land, cost of
equipment, means of transport, cost of technology transfer…They need to be
certified by the authority agency and in accordance with the regulations of the
Ministry of Finance.
- Mobile capital is the amount needed to be spent on certain investments in a
number of items to make it convenient for the business of the project. Mobile
capital needs identifying for each year and for each specific component. Mobile
capital of the project is usually determined by the formula:
Mobile capital = CB + AR - AP + AI
in which: CB: Cash savings

AP: Items must be paid

AR: Items must be received

AI: inventory

Table of Mobile capital savings
Year
Items

1.

Cash savings (CB)

2.

Items must be paid (AR)

3.

Items must be received (AP)

4.

in stock (AI)

I

I
I

I
II

Total (1 + 2 – 3 + 4)

Students: Nguyen Quang Hai - ieMBA B01

15


Investment project for An Phat steel structure factory

* Identifying funding sources for the project, the ability to secure capital from each
source in terms of quantity and schedule

Capital structure table
Capital
expense

Items

(interests
of capital)

1.

Total

Manufacturing

Construction stage

Year 1

Year 2

Total

stage

--

Year 1

Year 2

--

of

investment
capital
2.Resources
+ Budget
+ Self-financing
+ loan

1.3.2. Estimating annual turnover of project
Annual turnover estimation of the project is to help estimate the partial
results of the project activities, being an important premise to predict the benefit,
determine input cash flow and scale of the project in the future. Project revenue
mainly from sales volume of products or services that projects create and is
expected to supply the market corresponding to each period during the project life
cycle.

To estimate the annual revenue of the project, it need to estimate the basic
parameters of the design capacity, the annual rate of production the annual
inventory, the unit price of the product as well as the change of prices in the future.

Students: Nguyen Quang Hai - ieMBA B01

16