You are on page 1of 4

PROJECT APPRAISAL AND FINANCING

PGDBM-FMG-W13

MID TERM EXAMINATION - FEBRUARY 16, 2006

Time: 1 HR. 15 MIN.


MAXIMUM MARKS…20.

ROLL NO. ……….

Notes:

 Attached herewith is an exercise. Go through it and complete the


table given at the end.
 Breakup of marks given in the table.
 Do your rough workings on the backside.
 No reasoning or working to form part of the table.
 Show results upto two decimal points.
 Please do not use pencil.
 Please return all these papers to the invigilator.

…Good Luck

Page 1 of 4, 16/02/2006, PAF, Mid Term Examination, FMG 13.


EXERCISE

Rajeev Vishvapriya Ventures Ltd. is embarking upon a new project. The following
information is provided:

A. COST OF PROJECT

The capital cost of the project is estimated as follows:

Rs. Lacs

Land and site development 320


Building 1180
Plant and machinery 4940
Miscellaneous fixed assets 330
Preliminary and Public issue expenses 200
Pre- operative expenses (including interest During 840
construction)
Contingency margin 560
Working capital margin ?
TOTAL COST ?

B. ASSUMPTIONS FOR FINANCIAL PROJECTIONS:

1. The construction period will last upto 3Ist March 2007.

2. The company will manufacture products A and B. The installed capacity on this basis
works out to 13800 TPA of A and 9240 TPA of B

3. The company will start commercial production on April 1, 2007. The expected
capacity utilization will be 65% in the first year, 75% in the second year and 85% in
the third year and beyond.

4. The Sales realization per Kg. of A will be Rs. 15.50 and that of B Rs. 16.

5. The cost of raw materials and consumables will be as follows:

 For 1 KG of A----Rs.10.00
 For 1 KG of B----Rs.9.50

Page 2 of 4, 16/02/2006, PAF, Mid Term Examination, FMG 13.


6. The power consumption at 100% capacity utilization will be 35 Lac units. Each unit
will cost Rs. 4.

7. Wages are expected to be Rs. 320 lacs, Rs. 360 lacs and Rs.410 lacs for the first,
second and third operating years.

8. Repairs and maintenance will be ½ %, of the total cost of all fixed assets except Land
and Site Development in the first operating year and ¾% in the second and third
years.

9. Other Factory overhead expenses will be Rs. 22.50 lacs for the first year. They will
increase at the rate of 5% per year subsequently.

10. The current asset requirements are expected to be as follows.

 Raw materials and consumables: 1.00month


 Stock-in-process: 2 days
 Finished goods: 0.75month
 Book debts: 1.50months

11. The suppliers of raw materials and consumables will provide trade credit for 1.50
months.

12. Margin for working capital is 30% of total current assets.

13. Treat year as consisting of 360 days and month of 30 days wherever required.

REQUIRED:

Please complete the table of projections given on the next page.

Page 3 of 4, 16/02/2006, PAF, Mid Term Examination, FMG 13.


TABLE

Sl. Item 2007-08 2008-09 2009-10 Marks


No Rs. Lacs Rs. Lacs Rs. Lacs
.
1 Sales 1.5

2 Raw Materials Cost 1.5

3 Power cost 1.5

4 Repairs and maintenance 1.5

5 Cost of production 1.5

6 Raw material inventory 1.5

7 Stock-in-process 1.5

8 Finished goods inventory 1.5

9 Book debts 1.5

10 Trade credit 1.5

11 Bank borrowing for working 1.5


capital

12 Margin money for working capital 1.5

13 Total project cost 2


(Rounded to nearest lacs of
rupees)

Page 4 of 4, 16/02/2006, PAF, Mid Term Examination, FMG 13.

You might also like