FROM: M. Manikandan, (Reg. No: 311374), II-year M.B.

A, Department of Management Studies, Manonmaniam Sundaranar University, Tirunelveli 627 012. TO: Dr. N. RAJALINGAM B.E., MBA., Ph.D.

Assistant Professor,
Department of Management Studies, Manonmaniam Sundaranar University, Tirunelveli 627 012.

Respected Sir, Sub: MBA Main Project Reg Ref: Your letter/MSU/MBA/PRO/2012-13

1. I have undertaken a Project work in SRI DEVI KARUMARIAMMAN CONSTRUCTIONS, CHENNAI.

2. My projects title A STUDY ON THE CHANGES IN THE INPUT COSTS ON THE PROFIT GENERATED BY CIVIL AND STRUCTURAL WORK FOR CHENNAI PETROLEUM CORPORATION LIMITED PROJECT FOR SRI DEVI KARUMARIAMMAN CONSTRUCTIONS, CHENNAI

3. My Main Project OBJECTIVE as following sir:

OBJECTIVES

To trace the cost of input of the Indian Oil Corporation Limited project at the time of Project Planning and during the period of Project Implementation.

To compare the Projected Cost and the Actual Cost and Calculate the Deviation. To calculate the Internal Rate of Return of the project, both at the time of Tender and at the time of Completion. To study the impact of these changes in the Input Cost on the Profit generated by the project.

TOOLS USED FOR THE PROJECT

Capital Budgeting Techniques:

1. Non-Discounted Cash Flows, 2. Disconnected Cash Flow.

1. NON-DISCOUNTED CASH FLOWS: A. Pay Back Period (PB), B. Accounting (or) Average Rate of Return (ARR).

A. PAY BACK PERIOD (PB):

Initial Investment Pay Back = -----------------------Annual cash inflow

Acceptance Rule:
Accept if calculated value is less than standard fixed by If the payback period calculated for a project is less than management otherwise reject it. the maximum payback period set up by the company it can be accepted. As a ranking method it gives highest rank to a project which has lowest pay back period, and lowest rank to a project with highest pay back period.

B. ACCOUNTING (OR) AVERAGE RATE OF RETURN (ARR)

Average Net Income ARR = --------------------------Average Investment Average Income Average Investment Investment = Average of after tax profit = Half of Original

Acceptance Rule:
Accept if calculated rate is higher than minimum rate It can reject the projects with an ARR lower than the This method can also help, the management to rank the A highest rank will be given to a project with highest ARR,

established by the management. expected rate of return. proposals on the basis of ARR. whereas a lowest rank to a project with lowest ARR.

2. DISCONNECTED CASH FLOW: A. Net Present Value (NPV) B. Internal Rate of Return (IRR) C. Profitability Index (PI)

A. NET PRESENT VALUE (NPV)

NPV = Present Value of Cash inflow Present value of the cash outflow Acceptance Rule: Accept if NPV > 0 Reject if NPV < 0 May accept if NPV = 0 One with higher NPV is selected. B. INTERNAL RATE OF RETURN (IRR)

Acceptance Rule:
Accept if r > k Reject if r < k May accept if r = k where r = rate return k = opportunity cost of capital

C. PROFITABILITY INDEX (PI) Present Value of Cash inflows PI = ----------------------------------------Present Value of Cash outflows

Acceptance Rule:
Accept if PI > 1 Reject if PI < 1 May accept if PI = 1

Thank you, Sir

DATE: 27/Dec/2012 PLACE: Chennai-14.

Yours faithfully

M.Manikandan