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assemble all the data required to make the decision and meet in about a month to agree on the base data to be included in the analysis. A summary of the data presented at the meeting and any relevant discussion is shown below:
After considerable discussion it was agreed that the sales figures presented by John as shown in Appendix 1 would be used in the analysis. Maria however did not believe the increased insurance business would be achieved because the company accepted all insurance work currently offered to them. She believed that this revenue should be excluded from the analysis but had been overruled by Roberto as John had stated that more business would be offered by the insurance companies due to the improved quality of the new spray booth. (If this new insurance business was excluded from the analysis the increased headcount could be reduced by one from year 2 onwards and material costs and general consumables would decrease also).
The quote for the German machine had been confirmed in writing but they had also included an offer to train key staff to use the new technology which would cost $35,000 which FBSR would take up. This would occur prior to the commencement of commercial operations and would involve a supervisor travelling to Germany. The tax office had confirmed that the $35,000 would be a tax deduction at the time the amount was paid although Maria said the company did have the opportunity of spreading this cost and about 20% of the cost of John’s overseas trip over ten years for accounting purposes.
The number of employees would be increased. At the start of the new business a new supervisor would be required for the new area. One of the current employees will be promoted. The increase in wages cost of his promotion including all on-costs will be $16,000 p.a. His current position in the current building would have to be replaced at a total cost per annum of $65,000. Details of the other agreed increases in wages are shown in Appendix 1. It was also agreed that an allowance would be made in the analysis for all wages to increase by 3% p.a.
There was no additional information available on building costs and it had been agreed that a 5% contingency be included on both the building and car park. Increased building maintenance costs are shown in Appendix 1.
The parts and material costs for the new business have been estimated as a percentage of revenue. The percentage for insurance work is 45% and for the historical car work is 20%. The costs of all general consumables i.e. paint, nuts, bolts cleaning rags etc. are shown in Appendix 1.
Roberto has told John that there are old tools and equipment held in the current warehouse that could be used in the new building. Although several years old they are fully depreciated and the new project could have them at no cost. The tools had recently been appraised for insurance purposes and had a market value of $10,000.
Maria has analysed the cash flow and the company would have to borrow $600,000 to finance the project. The bank has given preliminary approval but want to see a final business plan. The interest rate would be 8.25% p.a. and the loan will be repayable over 7 years with a monthly repayment figure of $9,427.
The company pays tax at a corporate tax rate of 30%.
Michael Potter has stated that a return of 15% on an investment of this type is appropriate.
Land is not depreciable and no capital gains tax wil本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。