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To our
Affectionate “Parents”
SUBMITTED TO:
SUBMITTED ON:
A
ll praise to ALLAH Almighty, the most merciful, and the most
gracious, without His help and blessing we would have been unable
to complete this project.
Regarding,
ENGRO FOODS:
EFL has become a significant market player in a short span of three years. EFL is the 100%
owned subsidiary of ENGRO.
Currently, it manufactures and markets various dairy products ranging from milk to
Ice-cream. Olpers (all purpose milk) in this short span has grasped approximately
34% market share in UHT market. In a population of 170mn, UHT milk comprises
Of only 3% of the total production of 33bn liters per annum - indicating vast room
for growth.
Culture
Our employee’s performance can only flourish in a sound work environment. That is why
ENGRO is committed to supporting its leadership culture through systems and policies
that foster open communication, maintain employee and partner privacy, and assure
employee health and safety.
Core Values
5 LEADERSHIP
11 INNOVATION
12 INDIVIDUAL GROWTH & DEVELOPMENT
*NEW PRODUCT*
TARANG CHEESE
There is an opportunity for a processor to add value to the dairy industry by processing
milk into cheese. Cheese is the product which is widely used in hotels, restaurants, fast
food corners and airlines, shipping lines and households. The food processing industry
of Pakistan is growing roughly 10% to 15% annually. Growing popularity of Western-
style cuisine, increasing urbanization, growing per capita income, and increasing two-
income families are fueling this demand. Local pizza restaurants are opening almost in
every corner of the road, which increases the demand for mozzarella and cheddar
cheese, interestingly local pizza industry uses locally made mozzarella and cheddar
cheese (Ratio: 50:50); hence one can easily find growth potential in the market. The
estimated total capital cost of the project is RS. 127,000,000. The growth rate for cheese
consumption in Pakistan can be conservatively estimated at about 10% a year across all
types of consumers.
=13.14 (1-6/20.5)
g = 9.2 %
16 KS OF COMPANY = D1/P1+g
= 6.552/10+0.127
= 15 %
17 BETA OF COMPANY
(Risk premium is calculated on the basis of indices index values of kse 100.)
Beta = 0.97%
www.trustbank.com.pk
www.igiinvestmentbank.com.pk
www.js.pk
(http://www.sjsu.edu/faculty/watkins/countryrisk.htm
18 Kd OF COMPANY
= i ( 1- tax )
= 13.5 % ( 1- 35 % )
= 8.7 %
19 WACC OF COMPANY = Kd ( 1 - T )( Wd ) + Ks ( Ws )
= 10.7 %
20 UNLIVERED BETA
bu = b / (1+ (1- T ) D/E )
bu =0.52%
(Our product is new in market and the beta of ENGRO FOODS is diversified beta
which is 0.97.On the capital structure of 55:45 but our product is new and the
market situation is nat such suitable so that the beta of product is 1.4.)
( Sales and cost of goods sold are estimated on the basis of the sales and cost of goods sold of
haleeb cheese in Pakistan .Depreciation on machinery is charged by 12%,assumed on the basis
of previous depreciation rates of ENGRO company )
http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
www.treasurydirect.gov/news/.../currenteebondratespr.htm
www.investopedia.com
www.nzdmo.govt.nz/publications/mediastatements/2009-11-09 )
25IRR
11.5% ................. 128732288
12 % …………… 126885283
255617571
= 0.115 + 0.00003388
= 0.11503
IRR = 11.503 %
26MIRR
YEAR 1 27664532(1+0.135)4 =45909945
YEAR 2 28126812(1+0.135)3 =41125207
YEAR 3 28598338(1+0.135)2 =36841094
YEAR 4 29079293(1+0.135)1 =33004997
YEAR 5 72125839(1+0.135)0 =72125839
TERMINALVALUE=229007082
COST = TV / ( 1+MIRR )n
MIRR = 12.51 %
27 Scenario Analysis:
Sales can be change from given rate due to change in market conditions or any other
circumstances so we will assume the three cases:
28 5 % increase in sales
29 Sales remains same
30 5% decrease in sales
5 % increase in sales
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
SALES 93345000 98012250 102912863 108058506 113461431
CGS 56007000 58807350 61747718 64835104 10076859
GP 37338000 39204900 41165145 43223402 103384572
LESS DEP 13001520 13001520 13001520 13001520 13001520
OP INCOME 24336480 26203380 28163625 30221882 90383052
LESS TAX 8517768 9171183 9857268.75 10577658.7 31634068.2
NET INCOME 15818712 17032197 18306356.25 19644223.3 58748983.8
ADD DEP 13001520 13001520 13001520 13001520 13001520
NET OP CASH 28820232 30033717 31307876.25 32645743.3 71750503.8
FLOWS
ADD NOWC 4000000
ADD SALVAGE 38555970
VALUE
NET CASH FLOWS 28820232 30033717 31307876.2 32645743.3 114306473.8
= 150476914 - 127000000
NPV = 23476914
5 % decrease in sales
NPV = - 30589965
31 RECOMMENDATIONS