This is a basic initial proposal and will face a great deal editing in the future.

The figures described in this proposal are mostly speculation and will be modified as per reality. However, the basic financial framework and nature of the business that is stated in this proposal will remain essentially same in the detailed plan.

The Business:
This proposal is about setting up an apparel manufacturing company, which will export ready made garments in foreign countries. Fundamentally, a modern knitting factory will be established to produce polo shirts and t shirts, (the products may vary) aimed to export in EU, North America, Middle East and Far Eastern Countries. The factory will be equipped with state of the art knitting, dieing and finishing machines and will be fully automated and computerized, aiming to produce world standard products in the most efficient way.

The factory will start with production capacity to produce 300,000 piece products per year which will be increased into 900,000 piece products per year within 8 operating years. The factory will sale its product @ $3 per piece. It has been speculated that the factory will reach 60% of its production capacity within the first operating year, 80% within second year and 100% within the final year. The company will aim to achieve breakeven within the first operating year. The details of the financials can be found in the pro forma income statement, balance sheet and cash flow statements.

Startup fund needed

Startup Fund Required
Land Building construction Machines Cash Vehicles Furniture and Fixtures Licenses and permits Legal Expenses Professional fees Inventory Salaries (3 months) Other Fixed Expenses (3 Months) Unanticipated expenses Other Total Setup Cost Needed (BDT)
0 10,000,000 10,000,000 2,500,000 2,500,000 500,000 50,000 50,000 100,000 5,000,000 2,283,000 267,000 500,000 1,250,000 35,000,000

Investment and Capital:

The factory will be setup in the unused land of Packages Corporation Limited. The company will be registered as a new private limited company and there will be no direct link with any other company. The owners of this company must view this corporation as a separate entity. The company will be formed by the owners of Packages Corporation. Each of the owners (who want to be included in this venture and are willing to take the risk of starting the new business) will transfer 2 katha of land from their respective shares in Packages Corporation into the new company. This must be remembered that the two katha of land will be deducted from their respective share of Packages Corporation. If all seven owners of Packages Corporation want to partake in this venture, the new company will begin with a total 14 katha land, which will act as the owners equity of the newly formed company.

Financing: It can be estimated that land value of Packages Corp. is 25 lakh per katha. Hence the total value of the land registered in the new company will be 7 x 25 lakh = 3.5 crore. It is sufficient to act as collateral to acquire Tk 3.5 crore term loan from bank. It has been speculated that interest rate on the loan will be 13.5% per year. The company will be financed by 50% debt and 50% Owners Equity.

Ownership Structure: The newly formed company will be owned by the shareholders at equal proportion of shares with allowance for allocating a logical and reasonable amount of shares to the Founder Managing Director of the company.

Dividend Policy: The company will be built as a high growth company; therefore the plowback ratio must be maintained high. The company will adopt a moderate dividend policy, and will focus in increasing share value. The company will not pay any dividend during the period of setting up initial outlay (2 years) and the first 5 operating years. However the management will aim to pay 5% dividend at the end of 6th operating year and amount of dividend will increase by 10% annually (at compound rate) if the company operates smoothly and generates cash as projected.

Profitability
Kcs=D1/Pcs+g Where, D1=3.15%, Pcs= 100, g=10% Therefore Kcs= 13.15%

Capital Structure: Capital Structure Weights Wd Loans 50% Wcs Common Stock Weighted Avg Cost of Capital (WACC) 50% Cost of Capital = Product

Source of Capital

Kd(1-Tax) 13.5%(1-30%) 9% Kcs 13.2% 6.58% 4.73%

100%

11%

Net Preresent Value Initiatial Outlay Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Terminal Value Net Present Value

70,000,000 2,989,500 3,698,500 5,405,610 -512,584 3,186,124 9,658,129 -5,272,659 5,347,093 20,502,691 24,932,013 311,650,168 173,386,522

Since, NPV is greater than 0, this project must be accepted.

Profitability Index Initiatial Outlay Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Terminal Value Net Present Value Profitability Index= (NPV+IO)/IO 70,000,000 2,989,500 3,698,500 5,405,610 -512,584 3,186,124 9,658,129 -5,272,659 5,347,093 20,502,691 24,932,013 311,650,168 173,386,522 3.48

Profitability Index is 3.48, which is greater than 1, therefore, this project must be accepted.

Internal Rate of Return (IRR)

Initiatial Outlay Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Terminal Value Internal Rate of Return

70,000,000 -70,000,000 2,989,500 3,698,500 5,405,610 -512,584 3,186,124 9,658,129 -5,272,659 5,347,093 20,502,691 24,932,013 311,650,168 18.49%

Internal Rate of Return is 18.49%, which is greater than WACC, 11%. Therefore, this project must be accepted.