Introduction:
Berger is well known brand established two centuries ago and now considered world
large paint manufacturer. In Pakistan Berger starts operations in 1950s now becoming
the most popular brand among all.
Berger become public limited when a Pakistani investor bought 49.3% of equity shares
whereas 50.6% owned by Jan sons and Nicholson Limited.
Initially Berger started its manufacturing operation in Karachi in 1955. It grow
economically and industrially but maintaining quality and expansion of its product.
Berger Plc (public limited) also start its operation in Lahore in 2006, it was comparative
move to take (advantage) edge over market share.
Berger grow by meeting its customer demand. It is arguably said that they are
manufacturing by focusing customers. Traits of Berger maintain quality.
All the operations they are carrying out are quality focus.
Analytically Berger has focused on different market quality and price wise by
differentiating products.
Quality is maintained through consistent skills and technology that cause success over
its competitors.
Berger is paint manufacturing company and it entered in many contracts of technical
nature with leading international manufacturing like Japan who make Berger capable of
automotive, vehicle, refinishes.
Berger has entered into a number of technical collaboration arrangements with leading
international manufacturers. These include the largest paint company in Japan, which
enables Berger to develop Automotive, Vehicle Refinishes and Industrial Paints
conforming to international standards; a Japanese chemical company, for Bumper
Paints; PCS Powders, UK for Powder Coatings; DPI Sendirian Berhad, Malaysia for
Road & Runway Markings; Cerachem for Construction Chemicals and Asian Paints for
Assignment
Decorative Paints. Recently, Berger acquired distribution rights of DuPont for Pakistans
vehicle refinish paint segment.[reference ..]
Mission
Despite many challenges, Berger Paints has succeeded in staying at the forefront of
Pakistans paint industry.
Innovation and technological development has enabled the company to achieve
corporate success through its
commitment to provide products of the highest quality and ensuring the ultimate
satisfaction of customers.
The companys employees are constantly encouraged to pursue the Corporate Mission
Statement:
We will stay at the forefront of innovation and technological development in the paint
industry.
We will achieve corporate success through an unwavering commitment to provide our
customers high quality
products to their ultimate satisfaction.
We will vigorously promote and safeguard the interests of our employees, our
shareholders, our suppliers and all
business associates.
We will play our role as a good corporate citizen and serve community where we do
business.[Reference]
Certificate
As an ISO-9001-2000 certified company Berger continues to upgrade and improve its
range by introducing innovative products in line with consumer needs.
Berger is not only a paint company it also provide different home solution
such as construction, free color solutions and professional color scheme
to make your home looking different.
Assignment
Berger is providing advice for color selection that consumer should use for
their products. It is ethical work they are giving to their consumer to show
their loyalty.
Health and safety is main concern. Safe employees work with concern
and diligence and the good thing is that they have make it part of the
objective. In Pakistan where health and safety are legal obligation but
many companies do not observe it. Berger makes sure that their
employees are safe and working in good environment. Ecologically they
are maintaining their standards as legal and constructive obligation.
Berger organize safety training programs to make their employees safety
handlers and in case of safety hazards their employees can deal such
situations.
For all safety measures they ensure through safety control officers and
safety auditors, such things give confidence to their working team. Team
is like family working and carrying their operations.
Assignment
3423
3083
3102
3387
(379)
Assignment
Net Cash
Flows
(5000)
3423
3083
3102
3387
(379)
Cumulative (5000)
1577
Cash Flow
Assignment
Disadvantage
ignore profitably.
Assignment
$000
$000
$000
$000
$000
6084
6327
6580
6844
(2374)
(2504)
(2642)
(2787)
Contribution
3710
3823
3938
4057
Fix Cost
(263)
(276)
(289)
(304)
Cash Flow
3447
3547
3649
3753
Taxation
(689)
(709)
(730)
(751)
250
188
141
372
3447
3108
3128
3164
(379)
(24)
(25)
(26)
(27)
Sales
Income
Variable
Cost
Capital
Allowance
Tax Benefit
After Tax
Cash Flows
Working
Capital
Scrap Value
Net Cash
250
3423
3083
3102
3387
(379)
.098
.797
.712
.636
.567
Flows
Discounted
@12%
Assignment
Present
3057
2457
2208
2154
(215)
Value
9662
Initial investment
(5000)
Working Capital
(500)
NPV
4162
Workings
Workings
Year
Selling
67600
70304
73116
76041
Sales
(units/year)
9,000
9,000
9,000
9,000
Sales income
($000)
6,084
6,327
6,580
6,844
price ($/unit)
Year
Variable cost
($/unit)
26375
27826
29356
30971
Sales
(units/year)
9,000
9,000
9,000
9,000
Variable cost
($000)
2,374
2,504
2,642
2,787
Year
$000
$000
$000
$000
Assignment
Capital
allowance
1,2500
9375
7031
1,8594
Tax benefit
250
188
141
372
$000
$000
$000
$000
Working capital
52350
54811
57387
60084
Incremental
24
25
26
27
Year
Acceptance Criteria
As the NPV of $4.161 million is positive, the expansion can be recommended as
financial acceptable.
Discussion about NPV
NPV is the advance technique of capital investment appraisal, it can be defined as, the
sum of the discounted cash flows less initial investment.
However, when calculating NPV of a project following things should be considered,
Relevant costing to calculate NPV
Future
Cash
Incremental
Cash flows connected with implementation of decision
Exception
Opportunity cost (scarification of future benefit)
Include,
Purchase price
Material cost
Wages cost
Assignment
Variable overhead
Fix overhead (only incremental FOH)
Irrelevant cost
Sunk cost
Committed cost
Notional cost
Un-avoidable cost
Advantage of NPV
The main advantage of NPV is that it evaluates projects in the same way as,
shareholders would do. It focus on how individual projects would affect shareholders
wealth this means only those projects with positive NPV will be accepted that will
increase shareholders wealth.
Also it considered time value of money and taking into account all cash flows.
Explanation of calculation
In the calculation of net present value in part a company is using money cash flow
technique due to inflation.it is a approach to investment appraisal discounts nominal
cash flows with a nominal cost of capital.
Nominal cash flow are founded by inflating forecast value from current price estimates
i.e. using a specific inflation.
Applying a specific inflation means that different projects cash flows are inflated by
different inflation rates in order to generate nominal project cash flows.
NPV Graph
NPV profile is a graph that shows a project NPV against variance discount rate.
Construction
Assignment
To construct a graph of NPV profile first calculate NPV using different cost of capital
assumptions and then plot these figures on graph i.e. NPV on Y-axis, cost of capital on
X-axis.