PROJECT INVESTMENT a NEW FINISHING WORKSHOP

PROJECT INVESTMENT "A NEW FINISHING WORKSHOP"

CONTENT
1. 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 1 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.

2. 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.
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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 1.
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
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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 2.
Table 2: Demand for equipment
No

Equipment

1
2
3

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)

4
5
6

Quant
ity
Model HCL 120
1
Model PCL X-458
1
Model SPB – 20’
1

Country of
origin
Malaysia
Malaysia
Malaysia

Model

FTA –100
PCH – 80

2
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
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2.4.2. Equipment:
-

2 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, 8 and 9 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+

1 Transportation means

19,355

8

202

-

1,210

2,419

2 Coating lines

28,500

8

297

594

3,563

3,563

3 Environmental
treatment equips

7,100

8

74

148

888

888
4


4 Production tools and
others

13,230

3

368

2,205

3,308

4,410

5 Office equipments

25,541

5

426

2,554

3,831

5,108

6 Machines at present

10,339

5

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

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- Petrol & car maintenance

0

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
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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 = 2 years 4 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.

3. Schedule:
Please see attached PDF file.

4. 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.
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-

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 9 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.

5. Reporting and evaluation project:
5.1. Reporting:

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-

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 2 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 2 years 4 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 6 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
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