Cold Storage vs Knitwear

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Cold Storage vs. Knitwear

Ajay and Durgesh studies together till 12th standards and then did M. Com and B. Tech respectively before joining MBA together. During their degree they interned in different industries so at to get maximum exposure and to gain practical experience. Both came from business oriented families. Ajay’s family was in retailing of textiles while Durgesh came from agriculture based family. After their internship they looked for the prospects of doing a business jointly as they knew each other for a very long time. Ajay was interested in entering knitwear industry while Durgesh was interested in setting up a Cold storage. Their families were happy for their children to starting up a business together and offered them 10 Lakhs each to start up a business which makes 20Lakhs in total. In their final project of MBA they made a feasibility report on their respectively chosen industry and business. Major Problem:

The major problem was to choose between setting up a cold storage or knitwear setup.
As they collectively had only 20Lacks to start up a business they had to decide which business is feasibly for them. They made feasibility reports on their business in which they were interested respectively. Decision had to be made which business to be chosen both businesses had their pros and cons. The data given for both businesses has to be analyzed before choosing the business.

Cold Storage
Cold storage required 2,800,000 of own funds and 2,500,000 Loans to start up the business as the total cost of project is 5,300,000 as mentioned in the report. Total cost structure suggests that the costs they will incur during the business would be 2,582,500 per annum and the revenue generated for the project would be 3,450,000 per annum. Keeping in mind all these costs and revenue the total profit before tax for this business would be 867,500 per annum and return on capital before tax would be 31% for running on full capacity. Knitwear

On the...
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