CAMCEM is a Thai cement company that operates in Cambodia and has a 25% market share in the cement market in Cambodia. The Company can produce 2 million tons of cement per annum, and there are four other major competitors in the Cambodian market with similar production capacity. Yet, there is an increasing demand for cement imports from Thailand to Cambodia. The total Cambodian cement demand is approximately 10 million tons per annum and is mainly driven by the retail market demand, contributing to 70% of the total demand. The B2B market demand is around 30% of the total demand.
CAMCEM produces high-quality cement in terms of strength and workability for both retail and industrial segments. CAMCEM has one of the largest cement production factories in the region, equipped with state-of-the-art equipment and facilities. The Company has three product types for structural application, masonry application and a separate product for the B2B segment. They source all raw materials from Cambodia and maintain world-class quality control and assurance standards in the production process.
At present, one of the Chinese cement competitors is building an additional capacity of 2 million tons of cement to start production by 2024. Another new player is currently conducting a feasibility study to create a new factory, but it is not yet confirmed. CAMCEM Board of Directors also requires to expand the market share in this market. The Board of directors has requested the Company's Executive committee to undertake a feasibility study in setting up a new factory and present the proposal in the next board meeting in January 2023.

You have been appointed as the project lead for conducting this project's financial feasibility and are provided with the following information to start with.

. The Company must invest USD 50 million for this new project to increase the grinding capacity of the cement by 1 million tons of cement.

. The CFO requires you to analyze several financing options to finance the project. The parent company will not finance this investment with equity. The CAMCEM should fund this new project through their local balance sheet, but it has the option to borrow from any market (not limited to Cambodia). The target gearing ratio of the parent company is 50% (i.e., the Debt/Total Assets ratio should be 50%)

Additional Information

	Unit	Figures
Cement Market Demand	tons in 2022	10 million
Local Cement Supply Capacity in Cambodia	tons in 2022	10.5 million
Expected increase in the capacity of CAMCEM from the entire project	tons	1 million
Initial investment for this project	USD	50 million
Consolidated Balance sheet extracts
Equity	USD	125 million
Debt	USD	50 million
Total Assets	USD	200 million
Gearing – Parent company	Total Debt/ Total Assets %	50%
Cost of Debt – Existing	%	6
Cost of Equity - Existing	%	9

QUESTION:

Evaluate different financing options that can be used for raising the required funds for this project. Determine the best financing method and justify your decision with relevant data, research evidence and calculations. You also should calculate the appropriate discount rate for this project.