Reference no: EM131245709
Assignment
The government is inviting proposals from suitably qualified local contractors for the design, finance and construction of tourist facilities at sites including Valencia, Caroni, La Brea (Trinidad) and Castara (Tobago).
Your firm, which has a patent valued at $100,000 for prefabricated panels made of local and recycled materials, intends to submit a proposal for eco lodges at the various sites. An architectural firm will be engaged for the design of the facilities, which your company will construct. A (3 year) business plan will be prepared to obtain financing for the project, should your proposal be successful.
The project is due to commence at the beginning of January 2017 with the design scheduled to be completed in 6 months. Manufacture of the prefabricated panels will commence at the beginning of May 2017, after installation of the new plant and equipment for the project, which will cost $600,000 and be depreciated on a straight line basis over 10 years (no salvage value). Works on site will also commence on May 1, 2017 with site preparation and foundation construction.
Investors will purchase (common) stock of $310,000 in the first year and there will be no more stock issued over the next 2 years. Your company will maintain a cash float of $110,000 in the first year of operation and also make a (long term) investment of $45,000 that year with a major supplier of the local materials. Income tax expense will be 25 percent (of earnings before tax) and a dividend of 20 percent (of earnings after tax) will be paid.
Listed below is other projected financial data at the end of the first three (3) years of operation:
2017 2018 2019
Accounts Receivable 47,500 75,000 115,000
Inventory 50,000 70,000 130,000
Accounts Payable 400,000 530,000 640,000
Revenue 9,000,000 12,000000 14,000,000
Cost of Goods Sold 6,900,000 9,690,000 11,000,000
Overhead Expenses 1,800,000 2,000,000 2,500,000
Long-term debt (mortgage) 380,000 370,000 360,000
(Mortgage) Interest expense 3,500 2,800 2,200
The Architect to be contracted will work on the project along with the following key in-house personnel:
Project Manager
Plant Manager
Plant Supervisors
Safety Officers
Design Engineers
Engineering Technicians
Site Engineers
Clerks-of-Works
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