Analysis of Project Feasibility | Report

Analysis of Project
Feasibility

Contents
Overview of Company............................................................................................ 2
Analysis................................................................................................................. 2
When the financing of the project is done on the basis of debt in UK................3
When the financing of the project is done on the basis of equity.......................4
When the financing of the project is done on the basis of equity and debt both 5
Adoption of home country or foreign country perspective....................................5
Any value addition to the company from project?.................................................6
Exchange Rate Volatility impact on the value created for HMS.............................6
Method of Financing the project?..........................................................................6
Conclusion............................................................................................................. 6

Overview of Company
Hatfield Manufacturing Systems Plc is an engineering firm which deals in the
design, development and manufacture of additive layer manufacturing systems
(3D Printing).The company is not only involved in the manufacturing and selling
of 3D print machines to other engineering firms but also engaged in supplying
components to aerospace and motor vehicle industries on a research and
development basis. The supplying of components to aerospace and motor
vehicle industries has been so successful that the company is giving a thought of
investing in a new plant which will be involved in the manufacture of these
components .The plant is to be located inTurkey.There are few reasons involved
for the location of Plant in Turkey which are listed here in below:
a) The government is keen to attract foreign investment.
b) The government is spending heavily on infrastructure.
c) Turkey has a competitive market and also has a substantial and
developing aerospace sector.
d) The population of Turkey is young and well educated
Hatfield Manufacturing Systems Plc also has number of concerns with respect to
set up of a plant in Turkey which are listed here in below:
a) Will the project be financially viable?
b) Should the company go for home or foreign country perspective.
c) Will the new project add value to HMS Plc.?
d) Will the exchange rate volatility impact on the value created for the
company?
e) Means to finance the project.
Analysis
In order to analyse the financial viability of the project, Capital Budgeting is
considered to be the most appropriate tool. It is used in the process of planning
and to determine whether the organization’s long-term investment such as
purchase of new machinery, replacement of machinery is worth of funding
through the entity capitalization structure. There are also many methods
available in capital budgeting which is used to determine the feasibility of the
project. The most common and important one is the Net present value analysis.
Net Present value helps in identification of change in cash flows which is
involved with relation to purchase of fixed assets and the same is discounted to
the present value. All the projects are than compare with the positive NPV and
the project which carries the highest NPV are accepted.
In order to compute the Net Present Value, the following consideration is
involved: