Memo

MEMORANDUM

To: Martha Ulrich, Plant manager,

Nectar Hector Company

From: James Naylor, Sales manager,

Nectar Hector Company

Date: 26 March 2012

Subject: Report on the analysis and suggestion of expansion of the syrup facility.

Please find enclosed an analysis of the expansion of the syrup facility.

I would like to thank Laura Jain (the company’s controller) and Dean Smith (the head of the production department) for their co-operation and help.

If you require any further information or analysis, welcome to contact me.

Report on expansion of the syrup facility

(26.03.12)

By: J. Naylor

To: M. Ulrich

Executive Summary

The objectives of this report were to offer the project analysis and to make suggestions of the expansion of the syrup facility.

Analyses were focused on the NPV and IRR analysis, sensitive analysis, and financial breakeven point analysis. This report recommends the expansion of the syrup facility because the acceptance of the expansion project will add value to the firm.

1. Introduction

This report was commissioned by James Naylor, Sales manager-Nectar Hector Company. Its objective is to analyse the expansion of the syrup facility and to recommend the expansion of the syrup facility.

Because the initial profitability analysis of syrup capacity expansion has many problems and it is not on the incremental basis, the NPV analysis is used in the new capital budgeting analysis.

This report analyses the NPV and IRR of this expansion project, and offer sensitive analysis and breakeven point analysis. Based on these analyses, it can make a conclusion that the acceptance of the expansion of the syrup facility will add value to the firm....