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Assumptions

Assumptions

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Published by Vinayak Bhosale

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Published by: Vinayak Bhosale on May 14, 2012
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05/24/2015

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Assumptions 1. Cost of land and its registration charges Rs.5 lakh 2. The cost of construction of buildings Rs.26 lakh i.

Office building: Rs.1200/sq ft * 500 ii. Compound: 3 lakh iii. Factory and storage building: Rs. 500/sq ft *3200 iv. Water tank: Rs.10000 3. Cost of plant and machinery including electrical and erection and transportation Rs. 6 lakh 4. Miscellaneous assets Rs. 25000 5. Preliminary and pre operative expenses Rs. 3 lakh, which includes interest on term loan payable during the period of implementation 6. Term loan of Rs. 20 lakh will be paid in the next 10 years, and one year of moratorium is given. The principle amount will be paid in all equal installments at the year end with the interest. For the first year no principle amount will be given and it will be divided in the coming years of repayment. But the interest will be paid over next 9 years 7. The plant is expected to operate at a 50% capacity for 1st year, 62.5% for 2nd, 75 for 3rd, 87.5 for 4th, and 100% from 5th year. 8. The sales turnover turn over at full capacity is expected to be Rs.7680000 9. Raw material required for the first year operation is Rs. 192000: Power 2400*5.6= Rs.13440 Wages and salaries: Rs.432000 and estimated to increase at rate of 5% annually Repair and maintenance: Rs.10000 and expected to increase 5% annually Water charges of Rs.5000 annually 10. Depreciation will be on straight line method Building: 3.34% Plant and machinery: 7.42% Miscellaneous assets: 6.33% The rates of depreciation for tax calculation, as per the income tax act are: Building: 10% Plant and machinery: 25% Miscellaneous assets: 10% 11. Administrative expenses for the first year: Rs.25000 and it expected to increase by 5% every year 12. Selling expenses are 1% of the sales turn over 13. Rate of interest for term loan: 12% per annum

Debtors are expected to pay one month later and all the good will be sold on credit basis 17.14. . Company will hold stock of raw materials for one month and half month stock of finished goods. Trade credit on raw material is available for one month 16. 25% of margin money has to be kept for the working capital 18. 19. Working capital loan: 15% per annum 15. Question of dividend does not arise as it is a sole proprietor firm.

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