This assessment is merit 15% of the entirety question assessment and is notable out of 100.
Saturn Petthrift Australia and New Zealand is Australia’s largest manufacturer of pet thrift consequences. Saturn bear been separeprimand of the Australian and New Zealand pet thrift view past inauguration their pristine manufacturing adroitness in Albury Wodonga in 1966. Past then they bear broad their manufacturing way to enclose other conditions in regional Australia and New Zealand including a world-leading manufacturing condition opened in Bathurst, NSW in 2015. Saturn Petthrift Australia New Zealand manufactures twain for the private bargains as polite as exporting consequences to aggravate than 26 countries. Saturn Petthrift is separeprimand of the larger aggravateall Saturn Group which is globally one of the largest aside held manufacturing companies and operates in a order of divergent constant emotional consumer issue (FMCG) sectors including manufacturing polite-known chocolate, confectionary, and succor brands as polite as pet succor and pet thrift consequences.
Saturn bear lowertaken externally commissioned bargain lore at a consume of $250,000 which has authorized that a bargain exists for a new bonus dog snack to be fictitious lower their ‘Optimal’ bonus pet succor label. The Saturn bargaining course bear estimated that the new consequence earn close sales of AUD$30 darling in the pristine year and that sales earn be expected to acception by 10% pa year on year for at smallest 10 years.
If Saturn produce behind a while this consequence hurl a manufacturing consequenceion course must be false at an estimated consume of $27.5 darling. To house the new consequenceion course Saturn bear the occasion to compose a resolve built adroitness close its corporeal dry succor factory in Bathurst for a consume of $8 darling. Alternatively, the consequenceion course could be built behind a whilein an corporeal unoccupied factory distance at the Wodonga crisis employment condition. When operational the new consequenceion adroitness is expected to beget generous season employment for an subjoined 20 staff. In specification you are advised that the Bathurst City Convention has unwavering to extend as an rousing if the new adroitness is built in Bathurst a 100% rebate of the convention corporeprimand reprimand on Saturn’s Bathurst condition (valued at $500,000 per year). In specification, the Bathurst City Convention has negotiated a one-off regional infrastructure cede from the NSW particularize legislation of $2.5 darling payable when composeion of the adroitness commences. The corporeal factory distance where the insert is intended to in Wodonga, Victoria is unused and there is no occasion consume associated behind a while it. It is expected that the consequenceion course insert and equipment earn be depreciated on a rectilinear course premise aggravate its expected adapted society of 10 years. The new erection in Bathurst earn bear a adapted society of 25 years and earn be depreciated on a rectilinear course premise. Saturn are an interpolitical union and pay Australian tax at the reprimand of 30% on receipts. The exalted budgeting decomposition should be induceed on an behind tax premise.
You bear been asked by Nathan Quinlivan the Demand and Strategy Finance guide for Saturn Petthrift Australia New Zealand to induce a exalted budgeting decomposition of the two options. Saturn bear a global target reappear on investment of 22% pa. Margin behind Conversion (MAC) for this new consequence is budgeted at 30% of vicious sales.
Nathan Quinlivan advises you that he is solicitous encircling three issues:
1. That the possibility of consequence cannibalisation has not been considered;
2. Marketing estimates of year on year sales acceptions are exalted; and
3. He believes that the pristine $6 darling consume of the unoccupied Wodonga factory distance should be considered in the decomposition.
For twain the Bathurst and Wodonga consequenceion options rate the following:
• After-tax coin flows (6 marks).
• Payback periods (4 marks).
Net bestow rates (6 marks).
Profitability renunciation (4 marks).
What instruction would you fabricate respecting the projects? Discuss any excite instruction that you may claim to succor you fabricate the accept/reject sentence encircling either of these projects (5 marks).
Define ‘consequence cannibalisation’ in exalted budgeting sentences and harangue Nathan’s concerns that it should be considered (5 marks).
Address Nathan’s concerns that Saturn’s bargaining course’s budgeted sales estimates may be too exalted. What exalted budgeting options are adapted to liquidate for such an hallucination? (5 marks)
Address Nathan’s concerns that the pristine rate of the unoccupied Wodonga factory should be enclosed in the decomposition (5 marks).