Capital expenditure based Plan 3000 words – 20210618U

Submit a Plan (your own work), which must include capital budgeting, to the Board of Directors to support or reject their proposal case. CASE: You are the financial director of a transportation and logistics company with diversified operations in many sectors of the South African economy. Your revenue per annum is R5 billion, Net profit after tax is R375 million and Total assets of R5 billion. The company’s debt to equity ratio is 1. Corporate Income Tax is payable at a rate of 28%. Average cost of Debt is 10% The company has managed to grow revenue over the last ten years at 1.1X Nominal South African GDP. The board wishes to implement a rolling five-year capital expenditure plan to remain abreast of changes in technology and to ensure the reliability of environmentally sustainable vehicles. Vehicle and asset finance are used to finance newly acquired vehicles over a period which generally matches the useful life of the vehicle. This finance and maintenance model, combined with the operational efficiencies of new vehicles, must create a vehicle fleet that ensures the company remains competitive and positions the division for growth. Complementing the above the board wants to establish a control tower to monitor the efficient and safe movement of vehicles through various integrated technologies in partnership with leading technology and IP service providers. The facility tracks vehicles against defined route plans and manages their performance through live exception-based reporting. Monitoring vehicles assists in mitigating the risk of goods-in-transit theft and hijackings, ensures load integrity, and contributes to increase operational efficiencies and utilisation. The track and trace functionality of the system, which monitors adherence to road and contract regulations, will assist in providing customers with a safe and reliable service. The integration of the control tower into customers’ supply chain receiving and dispatch points, as well as improving supply chain management through visibility and information availability, is a premium value-adding service. The management of and the measurement against these critical success factors does not only have a direct impact on the bottom line of the business, but also serves as a great contributor to reduced CO2 emissions – in support of a more sustainable and environmentally friendly fleet. The Board believes that these initiatives will through increased pricing and the capturing of additional market shares, increase revenue by 10% at an additional net margin of 1%. The cost of the project is estimate at 10% of total assets. QUESTION: Submit a Plan (your own work), which must include capital budgeting, to the Board of Directors to support or reject their proposal. Requirements: 3000 words