Group Assignment FIN202

Corporate Finance (Trường Đại học FPT)

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Group Assignment – FIN202

Members of Group 1
Dương Quốc Nhật Quỳnh CS171511
Lê Hoàng Cẩm Vy CA171167
Lê Ngọc Nhi CS160051
Nguyễn Thị Tuyết Trinh CS160518
Nguyễn Thành Nhân CS170836
Lê Trung Nguyên CE160764

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I. Introduction:
1. What about Dat Bike?
2. The company’s project.

II. Summary Of Project Data:

1. Operating assumption.
2. Sales revenue.
3. Costs/Revenue.
4. Opportunity costs.
5. Initial outlay.
6. Salvage value.
7. NWC requirement.

III. Capital Asset Pricing Model (CAPM).

IV. Calculate Project Cash Flows:
1. Estimate the yearly cash flows of the project.
2. Apply NPV, IRR, and payback period rule to determine whether we should take
the project to improve the value of your startup.

V. Evaluate the project through 3 methods NPV, IRR,

and Payback:
1. Identify your assumption on the nature of real options embedded in your project.
2. Re-estimate the yearly cash flows of the project. (good - bad)

VI. Project Risk Analysis.

VII. Conclusion.
VIII. Recommendations.
IX. References:

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I. Introduction:
1. What about Dat Bike?
Dat Bike is a Vietnamese electric motorcycle manufacturing company, founded in 2019
by Mr. Nguyen Ba Canh Son - a talented software engineer who has won many national
and international awards in the field of technology. Son realized that the image of
motorbikes is associated with Vietnamese people. The number of motorbikes is so much
that it "plows" the atmosphere, causing serious environmental pollution. If the market
appears motorcycles using non-fossil fuels with the same powerful capabilities as
gasoline cars, consumers can both meet their needs and form a modern green lifestyle.

2. The company’s project:

Most electric vehicles on the market have low capacity and speed, not meeting the usage
habits of Vietnamese people. Canh Son once shared that when he was still in the US,
Tesla had a foothold in the electric car market, but electric motorbike startups often
failed and closed after the first round of funding because there was no market, not even a
market. there is a market. Although the problem of technology has been solved.
Because we want to expand the mass production process to increase productivity and
reduce the selling price of the car to about 25 million VND, an affordable price for easy
access to consumers, Dat Bike company wants to call for more investors. The project's
capital is 900 billion VND, of which fixed capital is VND 600 billion and working
capital is 300 billion VND. The maximum capacity of the house is expected to be 2000
motorcycles per year with the main products being electric motorcycles, components for
electric vehicles, and replacement batteries for vehicles.

II. Summary Of Project Data:

1. Operating assumption:

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 2. Sale revenue:
Sales revenue is the income a business generates from the sale of goods or services.
According to the operating assumption, sales revenue is 267,568,241,596 Dong.
3. Costs / Revenue:
Cost of revenue is the total of all costs incurred directly in producing, marketing, and
distributing the products and services of a company to customers.
Formula: Costs of revenue = Total cost / Total revenue (%)
Applying the formula:
Total cost = 39,867,463,582; Total revenue = 267,568,241,596
=> Costs of revenue = 39,867,463,582 / 267,568,241,596 = 15%

4. Opportunity costs:
Opportunity cost is defined as the lost benefit of the best choice missed. In any decision,
there is an opportunity cost because by choosing that decision you will forgo the other
option.
Formula: Opportunity cost = Total revenue - Total cost
Applying the formula:
Total cost = 39,867,463,582; Total revenue = 267,568,241,596
=> Opportunity cost = 267,568,241,596 - 39,867,463,582 = 227,700,778,014 (Dong)

5. Initial outlay:
The initial outlay is 900 billion VND, of which fixed capital is VND 600 billion and
working capital is 300 billion VND.

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The maximum capacity of the house is expected to be 2000 motorcycles per year with the
main products being electric motorcycles, components for electric vehicles, and
replacement batteries for vehicles.

6. Salvage value:
Salvage value is calculated according to THE STRAIGHT-LINE METHOD: The annual
depreciation = (Cost of an asset – Residual value) / Expected useful life of the asset.
The production line is assumed by the company to have an Expected useful life of 80
years. So, the annual depreciation is 500/80 = 6,25 billion VND.
After 5 years, the salvage value is 468,75 billion VND.

7. NWC requirement:
Working capital assets are project cash and inventories and accounts receivable. It is
calculated as 13% Summary of Operating Assumptions.

CAPM evolved as a way to measure this systematic risk. It is widely used throughout
finance for pricing risky securities and generating expected returns for assets, given the
risk of those assets and the cost of capital.
Applying the formula:
Risk-free rate = 10%
Expected return on the market = 15%
Beta of the investment = 1.5
Market risk premium = expected return on the market – risk-free rate = 15% - 10% = 5%
=> Expected return of investment = 10% + (15% - 10%) * 1.5 = 17,50%

III. Calculate Project Cash Flows:

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 1. Estimate the yearly cash flows of the project:
As expected, in 2023 the project will have a revenue of 267,568,241,596 VND and
continuously increase by 7% over the years, until 2027, the revenue will reach
1,268,459,367,572 VND. Total Operating costs year by year will be equal to Operating
costs plus Total Costs of Revenue and will increase year by year from 49,567,463,582
VND in 2023 to 68,270,153,430 VND in 2027. The amortization for this project is fixed
year by year at 5,000,000,000 VND. From those data, we calculate that the Net income in
2023 is 174,400,622,411 VND and gradually increases by 2027 is 960,151,371,314 VND.
Next, in the Cash Flows table, Operating Cash Flow is calculated by net income in each
year plus depreciation, then the Operating Cash Flow in 2023 is 179,400,622,411 VND
and the same calculation in years. CAPEX only available in 2022 is 700,000,000,000
VND, next we calculate NWC equal to 13% of revenue per year and subtract the
following year's NWC from the previous year's NWC to get the result of Chg. Print
NWC.
Finally, the result of Total Cash Flow is - 700,000,000,000 VND in the first year, and in
the second year, Total Cash Flow is 144,616,751,003.72 VND, increasing gradually until
2027 reaching 1,382,383,531,974 VND.

2. Apply NPV, IRR, and payback period rule to determine whether we

should take the project to improve the value of your startup:
- NPV=1,228,846,664,127 > 0: This project is selected, as a profitable, worthwhile
project, that has economic return.
- Payback Period = 2.729 years shows that this project has the ability to pay back
after more than 2 years should be selected.

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- IRR = 45,69% > Cost of capital so accept the project. The expected IRR of this one
project is higher than the cost of capital making the net cash flow into the company
higher. Hence the project looks profitable and the management should proceed with
it.

IV. Evaluate the project through 3 methods NPV, IRR,

and Payback:
1. Identify your assumption on the nature of real options embedded in
your project:
Assume that there are:
- There are 20% sales revenue is $63,155,076,512 VND in year 1 and will increase
next year.
- There are 20% sales revenue is $42,103,384,342 VND in year 1 and will decrease
next year.

2. Re-estimate the yearly cash flows of the project. (good - bad)

Product Electric Vehicle Income Statement & Cash
Flow

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- NPV = 1,487,700,557,361 > 0: This project is a selected, profitable, worthwhile project,
and has economic return.
- Payback Period = 2,61 years shows that this project has the ability to pay back after
more than 2 years should be selected.
- IRR = 53% > Cost of capital so accept the project. The expected IRR of this project is
much higher than the cost price, which makes the net cash flow into the company high
and strong. Therefore, the project looks very profitable and the management should
proceed with it.
- Through the changing structure of data and indexes in the context of positive economic
growth, the project's free cash flow grew with a strong fluctuation within 5 years of
operation.
Product Electric Vehicle Income Statement & Cash Flow

- NPV= 803,585,856,313 > 0: This project is selected, a profitable, worthwhile project,

and has economic return.
- Payback Period = 3,156 years shows that this project has the ability to pay back
after more than 2 years should be selected.
- IRR = 35% > Cost of capital so accept the project. The expected IRR of this one
project is higher than the cost of capital making the net cash flow into the company
higher.
In the context of the downturn economy, the investment for the Electric Vehicle project
will be able to create returns and profitability. Furthermore, the payback period is
determined at 3,156, this index proved repayable ability, at least within 3 years. Finally,

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the indicators NPV, IRR, and Payback Period represent that in an economic downturn,
Electric Vehicle is worth investing in.
V. Project Risk Analysis:
1. Capital Asset Pricing Model (CAPM):
CAPM evolved as a way to measure this systematic risk. It is widely used throughout
finance for pricing risky securities and generating expected returns for assets, given the
risk of those assets and the cost of capital.
Applying the formula:
Risk-free rate = 10%
Expected return on the market = 15%
Beta of the investment = 1.5
Market risk premium = expected return on the market – risk-free rate = 15% - 10% = 5%
=> Expected return of investment = 10% + (15% - 10%) * 1.5 = 17,50%

2. Risk Analysis:
With a growth rate of about 10%/year and sales of up to millions of units, the electric
motorcycle market is very fertile also because electric cars are increasingly interesting to
consumers. Besides, many organizations and individuals have smuggled and
counterfeited this item for profit. The company will likely face the problem of electric
vehicles and components being counterfeited and released into the market. Many
consumers who do not research carefully will not be able to detect which is a pirated car,
and which is a genuine car, leading to damage to the company's reputation and profits.
This is a risk that jeopardizes the profitability of the project. Another production risk is
that if the production process of electric scooters and components is not careful, it will
lead to poor product quality, potentially endangering users. In the world today, there have
been recorded cases where the firing process caused a fire on electric vehicles while the
vehicle was charging, causing certain dangers to people and surrounding environmental
conditions. However, these risks are within the control of the company. The project has
been put into operation and plans and solutions have been prepared to control the above

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risks. Avoiding the above risks is possible, the economic efficiency and profit of the
project will still be the same as the original calculation.

VI. Conclusion:
The implementation of a business project of electric motorcycles, electric vehicle
components, and replacement batteries is a good choice. Demand for these products has
increased significantly over the past few years and is expected to continue to do so for the
foreseeable future. We applied the NPV, IRR, and payback rules to determine if a project
should be implemented to improve start-up value, and the results are very feasible.
Production costs have also been kept low, making these products affordable for
customers and also providing substantial profits for the company. This project will allow
the company to remain competitive in the market while providing customers with quality
products at affordable prices. Overall, this business venture will succeed in providing
consumers with a more efficient means of transportation while also reducing their overall
costs. With the growing demand for electric vehicles, it is expected that this business
project will continue to grow in the future. We can conclude that this business venture
will be a great success and will be more and more successful in the years to come.

VII. Recommendations:
Investing in a motorcycle and electric vehicle component trading project is a great way to
capitalize on the growing trend of electric vehicles. The key to success in this project is to
develop appropriate recommendations for investments and operations. Although electric
motorbikes have outstanding advantages in terms of environmental friendliness and fuel
economy, there are still limitations in speed, the ability to travel not far, and the charging
time is quite long. Priority should be given to the development of the TCVN and QCVN
systems of charging stations, fast charging systems, battery exchange stations, etc. to be
able to put technical and safety requirements of devices and charging stations into
management. management, reduce risks and improve the efficiency of electrical safety in
the process of putting electric vehicles into public operation. Find ways to maximize
profits, reduce costs, and ensure product quality control. Next, it is necessary to
strengthen the coordination of manufacturers, importers, and distributors with media
units and relevant state agencies to promote propaganda and popularisation of the TCVN
and QCVN systems. came to the community to bring the standards and standards into
reality and promote the application of TCVN, and QCVN in harmony with the
international standard system. Finally, there is a need to explore ways to use new
technologies such as AI and machine learning to optimize operations and increase
customer satisfaction.

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VIII. References:
Xe Máy Điện | Dat Bike
Dat Bike gọi vốn thành công 5,3 triệu USD - VnExpress Kinh doanh
Dat Bike: Từng bị Shark Bình chê thẳng mặt, giờ đây sản xuất không kịp bán, founder
được quỹ đầu tư kỳ vọng là Elon Musk trong mảng 2 bánh của ĐNÁ (vnfinance.vn)
Dat Bike: Startup xe điện từng lên sóng Shark Tank vừa gọi thành công 5,3 triệu USD
vốn đầu tư (cafebiz.vn)
What Is the Capital Asset Pricing Model (CAPM)? (investopedia.com)

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