Dear Sir,
My recommendations for the planned expansion into Europe are as follows:
- Go ahead with the expansion into Europe.
- The limitation of the US market will stunt growth and Europe represents a market that CSI has some presence in but could expand with CSI’s broader involvement and presence.
- CSI should lease a production facility because it is the more cost-effective approach for putting up production capacity in Europe.
- The NPV of spending's for a leased facility is lower than building the facility. Preserved cash from the savings could be used for operations.
- Acquire a license from ESF.
- This would give CSI access to ESF’s special boards market. Even if it pays extra per board for the license, CSI will have the opportunity to make their boards as per client specifications and then offer the CSI guarantees it is known for in the US to cultivate and expand its client base.
- Acquire a US$ 1 Million loan for the expansion and try to negotiate an interest rate that is lower than 10%.
- While the cashflows can support payments for the loan and is calculated to produce positive cashflows for the company, a lower interest rate would help the company stabilize its resource use to be able to compete better in a foreign market.
References:
Investopedia. 2012. Applying NPV Analysis to Investment Decisions. Retrieved from http://www.google.com.ph/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CDIQFjAB&url=http%3A%2F%2Fwww.investopedia.com%2Fexam-guide%2Fcfa-level-1%2Fcorporate-finance%2Fapplying-npv-net-present-value-project-decisions.asp&ei=nva7UJvCO-SBiwK3oYGoBA&usg=AFQjCNHOxp0Ggmqm2kIdvHo9UmAEOZ2XHw&sig2=ht8vN2GyeLBy0zZr_GSyJA
Growth Business. 2012. Business Planning and Expansion. Retrieved from http://www.growthbusiness.co.uk/growing-a-business/business-planning-and-expansion/
Microstrategy. 2012. Financial Analysis. Retrieved from http://www.microstrategy.eu/financial-analysis/
Mastracchio, J. and Zunitch, M. (Nov, 2002), :Differences between Mergers and Acquisitions,: Journal of accountancy, retrieved 28, Nov 2012 from http://www.journalofaccountancy.com/issues/2002/nov/differencebetweenmergersandacquisitions.htm
National Federation of Independent Business (NFIB), (2012), “Debt vs Equity Financing, Which is the Best Way for Your Business to Access Capital,” NFIB, Retrieved 28, Nov, 2012, from http://www.nfib.com/business-resources/business-resources-item?cmsid=50036
