April 27, 2016 TO: Augustine Mok FROM: Ruojia Li RE: Long-Term Investment Analysis As I know, the firm is expanding its service into the suburbs to the east and north of St. Paul, and this plan brings the high delivery costs. So our management team has been consider to set a transshipment point ---- to rent a vacant supermarket. What I should do in this report is to analyze the feasibility and profitability of this investment project. According the planning assumptions, the initial investment is the $330000 of transshipment facility. They will not have salvage value because due to the rapid changes of our business, and we will use straight-line depreciation. As the estimations, the project will save unit delivery cost by $7 for us ---- from $28 to $21, while it will also has additional annual costs of $180000 for rent, utilities, and insurance. The management team expects orders per week to be 600 in the first year, 1400 in the next year and 2000 in the third year. Moreover, in my report, the company’s marginal tax rate is set to be 40%; the cost of capital is expected as 24%; the week numbers are 52 per year.
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