Kimin Brewery Limited, founded in 1928 , is an integrated beverage company, and sells one of the world's most popular beer. Kimin also handles domestic distribution for several foreign brands, and it also owns stakes in several other breweries. The company now applies its own fermentation technology to areas such as plant genetics, pharmaceuticals and bioengineering. Kimin Brewery is currently appraising the proposal to retool one of their manufacturing plant site for something the world is in need of; industrial quantities of hand gel and sanitizers. The project feasibility committee has collated forecasted investments, financing, cash flows and other information for this project. a Machineries and assembly facilities would have to be acquired and installed. These initial investments in capital assets are estimated to cost $300 million. An additional set-up cost of $20 million is required to ensure compatibility of the production system with its fermentation technology. These would have to be fully paid before commencement of production. b. The newly acquired assets are expected to have a 12-years useful life, till the patent for its fermentation technology ends. The scrap value at the end of asset's life is estimated at $30 million. Depreciation on the new assets will be at cost over 12 years using straight line method. c Annual sales in over the next 12 years are projected to be as follows: d The initiation of production of would require increase in current assets of $30 million to finance operations such as inventory purchases. Current liabilities will also be expected to increase by $20 million. This net working capital will be released at the end of the project's life. e Annual fixed operating expenses is projected as per below. Included in fixed expenses are administration, selling and depreciation on the assets. Variable costs of production would be 20% of annual sales revenue. f The cost of capital for this project is forecasted at 15%. g Kimin pays a corporate tax rate of 23%. Capital gain on asset disposal is charged at corporate tax rate. On 1 April 2020, Kimin is attempting to budget cash flows through 30 June 2020 . On this latter date, the principal of a secured bank loan, \$5 million, will be payable. This bank loan was secured at 3.5% per annum. Cash Interest payment on this loan are settled monthly. An interim cash dividend of $6 million will be due end of June. The company only transact on credit sales. A discount of 6% is given to all customers who pay within one month. 70% of the accounts receivable will be received in the month of sale. 20% will be collected in the following month, and the remaining will be received in the month after next. There is a 5% provision for bad debt for accounts receivable in the month after the next. Projected and Actual Sales are: Purchases are made on basis of 70% the following month's projected sales. 50% of the purchases are paid for in the month of purchase, and a 5% prompt settlement discount is received. The remainder is paid in full the following month. Total budgeted fixed operating expenses for the year are $40 million Fixed costs are accrued evenly through the year. The operating variable costs is determined to be 10% of that month's projected purchases, which accrued evenly with purchases. Both fixed and variable operating expenses are paid in the month incurred. Opening cash balance as at 1 April is $25500000 Requirements: You will be required to write a management report in which the following points should be discussed. - Analyse the Investment proposals by using NPV and IRR and provide recommendations. You should also briefly comment on other investment proposal techniques that Kimin may use, and the limitations of using these techniques. - Provide an explanation on the different sources of funding available to the company, and their advantages and disadvantages and make recommendations as to how these funding sources are appropriate to the planned investment project. - Analyse the level of breakeven required if Kimin proceeds with the investment. - Prepare a forecasted cash budget for April to June 2020. - An evaluation of Kimin's performance or position during the same period. - A detailed Literature Review of the tools you have used such as capital investment techniques, breakeven analysis and budgets and their importance to the business case. - Other issues for management to consider that you think are vital for them to survive and make a profit