Question 6: International energy drink giant Energica Turkey's regional sales manager Hakan Çokbilir has the plans for the Middle East and plans to launch in Azerbaijan in 2021. The market price of the Company's plant in Turkey is determined to be $ 5 million. It causes the company to need a capital of $ 20 million in 2021 for the investment to Azerbaijan and to establish a new bottling factory and distribution channel. While the fixed expenses required for production, distribution and marketing as of 2021 are $ 3 million per year, 50 million liters of energy drink will be produced in the country at the end of each year. Variable costs arising from production and distribution will be 12 Cent per liter. According to the policy pursued, the expected minimum return rate of the company is accepted as 6%. The income from sales is expected to be 35 cents per liter. Bottling factories are expected to serve almost forever, so all unit costs and sales revenues are expected to remain constant forever. The company will be subject to a 30% tax tranche in accordance with the Azerbaijan tax law and capital investments will be eliminated with equal shares within 5 years. Do you think the company should make this investment? Why?
Question 6: International energy drink giant Energica Turkey's regional sales manager Hakan Çokbilir has the plans for the Middle East and plans to launch in Azerbaijan in 2021. The market price of the Company's plant in Turkey is determined to be $ 5 million. It causes the company to need a capital of $ 20 million in 2021 for the investment to Azerbaijan and to establish a new bottling factory and distribution channel. While the fixed expenses required for production, distribution and marketing as of 2021 are $ 3 million per year, 50 million liters of energy drink will be produced in the country at the end of each year. Variable costs arising from production and distribution will be 12 Cent per liter. According to the policy pursued, the expected minimum return rate of the company is accepted as 6%. The income from sales is expected to be 35 cents per liter. Bottling factories are expected to serve almost forever, so all unit costs and sales revenues are expected to remain constant forever. The company will be subject to a 30% tax tranche in accordance with the Azerbaijan tax law and capital investments will be eliminated with equal shares within 5 years. Do you think the company should make this investment? Why?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Question 6: International energy drink giant Energica Turkey's regional sales manager Hakan
Çokbilir has the plans for the Middle East and plans to launch in Azerbaijan in 2021. The market
price of the Company's plant in Turkey is determined to be $ 5 million. It causes the company to
need a capital of $ 20 million in 2021 for the investment to Azerbaijan and to establish a new
bottling factory and distribution channel. While the fixed expenses required for production,
distribution and marketing as of 2021 are $ 3 million per year, 50 million liters of energy drink will
be produced in the country at the end of each year. Variable costs arising from production and
distribution will be 12 Cent per liter. According to the policy pursued, the expected minimum
return rate of the company is accepted as 6%. The income from sales is expected to be 35 cents
per liter. Bottling factories are expected to serve almost forever, so all unit costs and sales
revenues are expected to remain constant forever. The company will be subject to a 30% tax
tranche in accordance with the Azerbaijan tax law and capital investments will be eliminated with
equal shares within 5 years. Do you think the company should make this investment? Why?
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