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The company CONES, S

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The company CONES, S.A. By observing the bottleneck generated by its baking phase, you are analyzing the possibility of buying a new oven to solve this problem. The investment required would be € 18,000, with a useful life of 4 years and a residual value equal to 10% of the initial investment.

It is estimated that with the new kiln, production and sales would increase considerably. Specifically, sales would grow by € 9,000 per year. Costs absorb 50% of sales.

To finance the purchase of the furnace, the current partners are willing to make the necessary contributions provided that the remuneration to be received is 12%; the new shares would be issued at 200% of the par value. The bank with which the company usually works also offers a 4-year loan, at 7% for the necessary amount as long as the current financial structure of the company is maintained (see balance in Annex I), a condition under which the partners also they agree.

The nominal value of the share is € 1. All the elements of the fixed assets of CONES, S.A. they are amortized using the straight-line method. The tax rate is 25%.

(ANNEX 1)

Capital	€180,000.00
Issue premium	€ 30,000.00
Reserves	€ 345,000.00
Long-term loans	€ 605,000.00
Short-term loans	€ 50,000.00
Suppliers	€ 60,000.00
Total	€ 1,270,000.00

1) Analyze in detail the suitability of the investment through the calculation of its IRR.
2) Detail how the new balance (Liabilities + Equity, with its different components) would look after making the investment