Bariq Company

Read the following case carefully and answer the requirement at the end of the papers

Introduction: Accumulation of garbage is a chronic problem in many developing countries.recycling factories can
transferit from a curse into a blessing to take advantage of waste properly instead of leaving as waste. In the following
data this factory will provide the communities with many social impacts such as: Energy Conservation.
Project definition: The proposed project is a “Plastic recycle factory” the project will cater the needs of the domestic
market The factory strive to provide the highest quality product of waste disposal and recycling, The firm were
committed to provide excellent solution to the environment and customer by introducing most updated technology
and continuing development in the Research & Development skills throughout Egypt and international. The project
will focus on [El-Khanka - El-Obour], where there are many plastic factories & it convert the plastic scraps to raw
material to other plastic factories.

- - Based on the following technical and financial assumptions for this project perform the financial
study .Find the new demand at the full capacity 2230 tons to do the sensitivity analysis; assume that
the project level of production for all products will be: 25% of rated capacity in worst, 50% of rated
capacity in average, 100% of rated capacity in best .Based on the following information.
-Total population is 1000 person, targeted population is 93.4%, and the population is growing by 3%.
-Average consumption per capita is 2, the ACP is growing by 3%. The product mix for this project is
40%Polypropylene (PP), 30% Polyvinyl Chloride (PVC), and 30% Polyethylene (PE).

1. Capital ( fixed ) investment requirements, are estimated as follows:

- Building are rented. Machines including All Stages are two Lines: Agglomeration and Pelting line (APL038)
it will cost $ 38098 and Crushing and Washing line (CWL038) will cost $ 37212. Given that the rate of exchange
rate is one dollar equal 16 Egyptian pounds (L.E); (Sales taxes included inside the prices). Furniture worth L.E
20, 000 and office equipment worth L.E 24609
2. Pre-opening expenses:
- Budget for training for labor is estimated to be L. E 5,000
- Other pre-opening expenses = EGP 15,397. Engineering drawings = EGP 5,000
- Commercial Registrations = EGP 5,000. Pay license fees = EGP 1,000
- Permit from Institute of Industrial Security = EGP 750. Facilities in the factory = EGP 20,000
- To accommodate increase in prices of fixed assets a contingency allowance of 1% of total fixed assets.
 3. Working capital requirements: The projected working capital for project under study is based on
the following assumption:
- One month supply of raw material to be kept on inventory
- One month supply of final product inventory based on first years’ total operating costs
- One month account receivable from total sales
- One month account payables for raw material

4. Cost analysis:
a- Raw material Requirements: Cost of garbage is L.E PP= 1, PVC =2 , PE =3 per ton
B- Direct labor: Direct Labor required at Full Capacity and Relevant Wages are estimated in the following
table:
Job No Wages / month
Production labor 20 2500
Cleaning staff 7 1200
- Assume that 40% for social security and 5% for incentives is the manager policy.

C- Overhead operating expenses

C-1-Overhead operating expenses are estimated on the following:

- Indirect salaries and wages are estimated with total cost LE 20,000; assume that 40% for social
security and 10 % for incentives is the manager policy.
B- Others overhead cost

- Maintenance is estimated to 4 % from the fixed assets (as lump sum for each year).
- An administrative expense worth L.E 1000 (as lump sum for each year).
- Sales cost and promotion expenses represent L.E 20000 in the (worst case), 15,000 in the Average
10,000 for the third best .

-Cost of utilities are estimated as follows:

- Total electricity required per year 1,094,400 KW /year the cost per KW is L.E 0.25.
- Total cost of water supply is EGP 360 per year (as lump sum for each year).
- Other annual cost of other utilities is estimated at EGP 6,000 [EGP 500 per month]; (lump sum for
each year).

D – Plant Insurance cost is estimated at EGP 50,000(as lump sum for best case .
 E – Land area rented with annual cost of rent EGP 60,000[Factory 1000m2 – EGP 5,000 per month]

F- Contingency is estimated at 1% of the cost of fixed investments (as lump sum for each year)

G- Depreciation and amortization Annual rate are estimated as follows:

- Building 20%
- Machinery and Equipment 20%
- Furniture and office equipment 20%
- Means of transportation 20% ( TANAGIBLE )
* Amortization ( pre-opening expenses) 10% ( INTANGABLE )

5. Financial structure:
Total investment requirements will be financed through a loan that mount half million of Egyptian
pound and the rest by equity

- Loan is to be repaid after three years; loan installment are 211,761 EGP for three years. Interest is 13%
6. Revenue Analysis, The suggested prices are as follows:
- Decision makers decide to price their product based on min price policy to penetrate the market
Prices
Product Company 1 Company 2 Company 3
PP 1600 1500 1400
PVC 1400 1300 1500
PE 1300 1400 1200

- Note that: there is no rejected items and sale Tax is 40% per year