For Hero Honda company, country's largest two-wheeler maker Hero MotoCorp announced a joint venture with Bangladesh's Nitol Niloy group and the two plan to invest around $40 million (over Rs 240 crore) in the next five years. The joint venture, in which Hero MotoCorp will hold 55 per cent stake and rest will lie with the Bangladeshi partner, plans to set up a new manufacturing facility which will have an annual capacity of 1.5 lakh units when fully functional by second quarter of 2015-16. You should also advise whether, based on relevant investment evaluation criteria, the organization should take up the project or not? You are also required to mention how the project will be financed and accordingly justify the cost of capital that will be used for evaluating the project. (Hint: Use capital budgeting).
For Hero Honda company, country's largest two-wheeler maker Hero MotoCorp announced a joint venture with Bangladesh's Nitol Niloy group and the two plan to invest around $40 million (over Rs 240 crore) in the next five years.
The joint venture, in which Hero MotoCorp will hold 55 per cent stake and rest will lie with the Bangladeshi partner, plans to set up a new manufacturing facility which will have an annual capacity of 1.5 lakh units when fully functional by second quarter of 2015-16.
You should also advise whether, based on relevant investment evaluation criteria, the organization should take up the project or not? You are also required to mention how the project will be financed and accordingly justify the cost of capital that will be used for evaluating the project.
(Hint: Use capital budgeting).
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