Joint venture with jamuna electronics

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Reference no: EM132524783

You are an advisor of Walton Hi-Tech Industry Limited (WHIL), a conglomerate based in Kaliakair, Bangladesh. Demand for your product has been high and you are looking at the following two alternative plans:

Plan I: Spend $94 million today on a factory in Bhaluka, Mymensingh that will be completed in 1 year. You expect to receive $40 million in profits from this factory at the end of the second year, at which time you also expect to sell the factory to Sharp Corporation, a Japanese competitor, for a further $70 million.

Plan II: Spend $120 million today in a joint venture with Jamuna Electronics. You expect to begin generating yearly profits of $13.5 million at the end of the first year and every year thereafter. You expect the joint venture to last forever.

The market interest you could achieve from IDLC Finance if you do not invest in any of the two is 8.5%. Which of the above plans would you undertake if you could undertake just one.

Reference no: EM132524783

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