Finance 463 Case

The time length for the project is given as 10 years, and all components of the project are subject to this same 10 year time frame. The project is starting in 2016, as Exhibit 1 shows Tiger Brands’ net income and other features until 2015, and runs for 10 years until 2025, Exhibit 2 shows most of the cash flows and components of the project, and extrapolates out to this date.

One portion of the project not listed in the Exhibits is the purchase and shipment of equipment to the India facility. This equipment, purchased in 2015, costs Tiger Brands 25,000,000 Euros (or 1,823,775,000 INR) and has a ten year lifespan and straight-line depreciation rate. This matches up perfectly with the time span given in Exhibit 2, and therefore maintains that all components of the project are using a 10 year lifespan.

The only other portion of the project not listed in Exhibit 2 is the result from rearranging the line and selling the associated equipment. By choosing this method, Tiger Brands will take old equipment valued at ZAR 235,000 and sell it for ZAR 285,000. This equipment had three years of straight-line depreciation remaining and therefore does not remain with the company for the entirety of the ten year project. This equipment, however, is still included in the ten year time frame because the depreciation comes off the books for the final three years, and it is therefore subject to the same 10 year time frame as the components listed in Exhibit 2.