02 PILES INVESTMENT PROJECTS 18.5 Construction and Investment LICOGI company Project name: 02 piles Investment Project Total investment capital: 18.921 billion VND Capital: commercial loans + equity Implementation period: 2014 I GENERAL INTRODUCTION 18.5 Construction and Investment LICOGI company was converted from branch of 18 Construction and Investment LICOGI company in Hanoi After construction and development with the growing the labor force, the branch official restructured into joint-stock company with the trade name: 18.5 Construction and Investment LICOGI company (Hereinafter referred to as "LICOGI -18.5") LICOGI 18.5 works mainly in areas such as civil engineering and industrial wharf transport and irrigation, hydropower, thermal power, urban investment, the industrial property investment business, LICOGI 18.5 build pride in their contribution to the construction of meaningful political, social and economic, as typified by the works: Uong Bi Thermal Power Plant, Pha Lai thermal Power Plant, International conference Centre, United Nations housing, the diplomatic corps, Bach mai hospital expansion, T1 terminal of Noi Bai, Horison star hotel, industrial and rural agricultural Development fair center, national Conference Center, Son La hydropower plant, Besides, the company is constructing industrial projects invested abroad, such as Ha Tay Brewery Tiger, Cai Lan flour production plant, Trensetter garment factory, Tinh Loi garment factory, Konishi Vietnam and ANT processing factory, Market demand for piles First, in the middle of 2011, the company invested to serve construction projects by Licogi 18 in Thinh Liet new urban area, the 21-storey project of the General Assembly building in Thanh Xuan - Ha Noi The go to construction projects will bring a huge piles workload In addition, the urbanization trend is growing strongly in most provinces in the country Accordingly, the high-rise buildings (offices, commercial centers, apartments, ) will be increasingly more investment in construction especially in major cities such as Hanoi, Ho Chi Minh City, Da Nang, Hai Phong Most of the textures will use tall piles to reinforce the background, this will be the conditions to create a huge workload for future construction contractors including LICOGI 18.5 Investment contents As analyzed above, the workload piles is quite large and in the future with the development of real estate market promises a huge workload for the contractor The tasks in the moment for the company: - Focusing resources to implement the undertaken and will be taken project This is an important condition to further enhance the company's reputation in the market - Further improving the capacity of equipment, extending field of bored piles This is to ensure that the conditions can win market share in the future in the field contribute pile raise annual production to sustainable development company Therefore, to perform the tasks mentioned above, the company is expected to invest 02 pile drilling machine (testing machine with straight holes), with the technical specifications are as follows: No Device Drill pile diameter holes Unit Set Quantity 02 drilled biggest gain from 1.8 Quality Quality rest at ≥ 80% to 2.0 m depth, creating the largest loss from 55-60cm The straightness of bores Piece 02 Quality rest at ≥ checking machine 80% The investment in equipment will be the basis to make LICOGI 18.5 can be active in the construction of completing construction works, catch the trend of development in the piles field in the upcoming period These conditions help the company be more active in the process of production, construction packages for piles that company or designated winning bid, as well as the projects which the Company invested At the same time the implementation of the equipment investment will create jobs for workers, increase profits from business operations, increase production capacity, increase competitiveness, reputation of the company on the construction market II FORMS OF INVESTMENT Investment in improving production capacity, in the form of shopping used devices III BUSINESS PLAN Management and operation of equipment plant Equipment investment will be transferred to an underground construction team to manage Business plan Equipment investment will immediately be used for construction work at Licogi 18 office project in Thinh Liet new urban areas and 21-storey buildings of Thanh Xuan District General Assembly building Then the other works will be awarded in the near future and leasing activities Based on the construction situation on the market today and in the future, expected annual output of the project is as follows: No Content Total average piles in year The average length One year volume performance Unit Pile m m Year – Year 340 45 15.300 Some measures to ensure the business plan - Promoting the marketing activities to seek and expand markets - Improving the effectiveness of procurement to improve the winning bidders - Strengthening the management of equipment, training routine, improving training skills - There are plans to repair and maintenance equipment to improve the quality and the longevity of the equipment IV TOTAL INVESTMENT CAPITAL AND INVESTMENT RETURN PLAN Total investment Based on the number of required devices investment, the price of similar devices on the market in the present time and some quotes of equipment suppliers, we determined the total investment of the project is: 18.921 billion VND (see appendix details) Capital investment Capital investment was made from two main sources: equity and commercial loans In which: - Equity (20%): 3.784.200.000 dong - Commercial loans (80%): 15.136.800.000 dong Investment return Investment loan is expected to be repaid within 05 years, the original loan will be paid in each quarter, the loan rate is payable quarterly on the basis of the remaining loans in the beginning of each quarter Interest rate is 19% / year V ECONOMIC EFFICIENCY CALCULATION OF FINANCIAL INVESTMENT PROJECT The investment in the aforementioned construction equipment to meet the capacity of the current plant construction company is essential but like the other project requirements set for the project is to achieve project, which means investing in projects to bring economic efficiency The economic efficiency of the project will be assessed by calculating some basic criteria: - The payback: T recovery - Effect of income and expenditure of the present time: NPV - Internal rate benefit: IRR Background, methodology and selection of project parameters - Based on the total investment - Based on the business plan - Based on calculation methods to determine the effectiveness of finance, economic investment capital - Depreciation time: the entire project in 08 years Determining the value of annual depreciation Each year depreciation is calculated using the formula: In which: V: Investment capital T: Depreciation time Regarding the Value of annual depreciation refer appendix Determine the annual operating costs of the project The cost of operation for each year (no basic depreciation) is determined by the formula: CP (vh) = Cnl+Ctl+Csc+Cql+Lv + BHCĐ + CPVT In which: Cnl: The cost of energy, fuel machinery Ctl: Salaries for officers and employees Csc: Equipment repair and maintenance costs Cql: Other administration expenses Lv: Banking Interest payments (initial capital investment and working capital loans) BHCĐ: Union insurance costs CPVT: Related material cost (determined by the material terms of the basic building unit) 3.1 Energy and fuel cost The norms take on fuel consumption specs of the machine, on the basis of reference to the fuel consumption of the same machinery Diesel price is: 14,251 VND / kg (before tax) Result of fuel costs and energy calculation shown in the Appendix 3.2 Salaries for officers and employees Based on the number of officers and employees who are expected to be arranged and paid salary, we compute and determine the wages in one year of the project Result of wage costs calculation shown in the Appendix 3.3 Equipment repair and maintenance costs Repair costs are calculated as a percentage (%) versus capital equipment, this rate is taken as the experience of using the same device Calculation results shown in the Appendix 3.4 Other management expenses Calculation results shown in the Appendix 3.5 Interest for bank loans Time to pay off the loan on commercial debt management plan is 05 years, the principal will be paid on a quarterly basis, together with all accrued interest included in that quarter Calculation results shown in the Appendix The annual revenue of the project • Sales projects in one year: - Revenue is determined on the basis of production planning and current project construction unit (temporary with Hanoi - where major works gathered) - Revenue is determined under the guidance of the decrees and the management of the current construction cost circulars guiding (CP 112/2009/ND- Decree and Circular No 04/2010/TT-BXD, ) Basic construction unit prices prevailing (compute unit prices of Hanoi) - Revenue of the project excludes construction materials Calculation results shown in the Appendix • The value of recovered assets The value of recovered assets after depreciation equal to 5% of the total value of equipment investment before tax, this clause is regarded as extraordinary revenue of the project in the last year Projected profit and loss year profitability of the project is determined by the formula: L = (Revenue in one year) - (Total expense in one year) Calculation results are presented in the appendix Calculating the financial performance indicators of the project 6.1 Payback period of investment in profit and depreciation The length of needed time to recover the entire amount spent by net interest income and amortization of giving Payback time - T0 is determined by the formula: T0 Detailed calculations refer Appendix 6.2 Target offsets the revenue and expenditure of the moment - NPV The time difference cost of revenues and expenditures - net present value (NPV) is determined by the formula: NPV = In which: Bt: Revenue of the project in year t Ct: The expense of the project in year t n: Number of operation years of the project r: Acceptable minimum profit rate (19%) V: Total initial capital investment of the project H: The value of recovered property at the end of the project life Calculation results detailed in Appendix 6.3 Internal productivity gains: IRR IRR is the experimental determination of the equation: NPV = =0 To find the IRR in the equation was the correct approach, and find the IRR will be determined by the following formula: Calculation results in the appendix 6.4 Calculation results of the performance indicators of the project - The payback through profit and amortization: 3.32 years - Repayment period (source of repayment is 30% of profit after tax + depreciation): 4.71 years - Effect of income and expenditure for the current time - NPV: 4.216.918.000 VND > - Internal rate of project profit - IRR: 26.13%> 19% 6.5 Assess the economic efficiency Synthesis basic economic indicators calculation results mentioned, we found that the NPV, IRR criteria are reached allowing efficient, target payback period is acceptable, so the project construction equipment said to be effective and economic benefit V CONCLUSION According to calculations and analysis above, we see investment economically worthwhile The project investment will be made to meet the demand for construction equipment for the company in the current period and the next period The investment in construction equipment has stated will contribute to improving equipment capacity, production capacity of the company from which enhance the reputation and competitiveness of companies in the construction market On the other hand, when investment projects is implemented will make the active in the production and business activities to create more jobs for workers, profits for the company, contributing to the improvement of employees live and work Yearly, an amount significantly contribute to the state budget through the payment of taxes  ... the number of required devices investment, the price of similar devices on the market in the present time and some quotes of equipment suppliers, we determined the total investment of the project... time - T0 is determined by the formula: T0 Detailed calculations refer Appendix 6.2 Target offsets the revenue and expenditure of the moment - NPV The time difference cost of revenues and expenditures... methods to determine the effectiveness of finance, economic investment capital - Depreciation time: the entire project in 08 years Determining the value of annual depreciation Each year depreciation