2. Godavari Electricals Ltd.

, wanted to set up its new plant for manufacturing of
heaters. The Management of Godavari identified that Kakinada, Vijayawada
and Hyderabad are the potential areas to set up the plant. Fixed costs per
year and the variable costs per unit at each of the three locations is given
below.
Location
Kakinada

Fixed cost

Variable cost /

/ Yr.

Unit

Rs.

325

2,00,000
Vijayawada

Rs.

285

2,50,000
Hyderabad

Rs.
3,00,000

265

The product is expected to be sold at Rs.1050 and the existing demand for
heaters in the market is 600 units per year. Calculate the likely profit at cash
of the location and determine the location that is the most profitable to the
company.
Solution
We calculate the total costs ( sum of the fixed and variable costs) at each of
the three locations when 600 units of goods are sold.
Total cost at Kakinada

= Rs.2,00,000 + (325 x 600)

= Rs. 3,95,000

Total cost at Vijayawada = Rs. 2,50,000 + (285 x 600)
= Rs. 4,21,000

Total cost at Hyderabad

= Rs. 3,00,000 + (265 x 600)

= Rs. 4,59,000

Total revenue of the firm = Rs. 1050 x 600 = Rs.6,30,000.

Therefore, the profits of the company if they were set up in the given locations
would be as follows.
Profit at Kakinada

= Rs.6,30,000 - Rs.3,95,000

= Rs. 2,35,000
Profit at Vijayawada = Rs. 6,30,000 – Rs.4,21,000
= Rs. 2,09,000
Profit at Hyderabad

= Rs.6,30,000 – 4,59,000

= Rs. 1,71,000

From the above calculations, it is clear that Kakinada is the most profitable
location to set up the new plant for producing 600 units per year.

3. Factor Rating Technique
The factor rating technique is based on the ranking of various weighted factors
that influence the choice of location.

Factor rating is used to evaluate

alternative locations. The advantages are:
• It helps managers decide why one location or site is better than another
• It helps in bringing diverse location considerations into the evaluation
process.
• It fosters consistency of judgment about location alternatives
The following are the steps involved in this method:
i.
ii.

iii.
iv.

Relevant factors related to location decision are listed.
Various factors are examined and weights are assigned representing their
importance.
For instance, the least important factor is 1 and a very
important one will be given a weight of 5. If the rating is high then it
conveys that factor is more important.
Location is also rated according to its merits on each factor.
Product of rating is computed by multiplying location rating and factor
rating.

But implementing an organized system for evaluating multiple company objectives requires careful judgment. determine the location that is most suitable for setting up of a new plant. and prediction of future conditions difficult. .The location with the highest score is considered superior. Following are the factors and corresponding weights assigned by the management of Indigo. evaluation should be more qualitative as the information required to make these decisions is often incomplete. Based on the data given below. Moreover. Indigo Glass Manufacturing Ltd. is evaluating two locations A and B for setting up of its new plant. 4.

Factor Factor Location Locatio Rating A n B Production cost 5 7 8 Supply of raw 4 6 5 4 7 6 3 8 7 2 6 9 2 5 2 materials Labour availability Proximity to customers Availability of facilities Tax advantage .

The sum of the scores obtained by each of the locations is calculated.Solution Now. Factor Production cost Supply of raw materials 5 4 Factor Locatio Locatio Rating n A n B 7 x 5 = 8 x 5 = 35 40 6 x 4 = 5 x 4 = 24 20 . we calculate the product of factor rating and score of each location for each factor. and the location with the highest score is then selected.

133) is higher than the score of location B (i.Labor 4 availability Proximity to 3 customers Availability of 2 facilities Tax advantage 2 7 x 4 = 6 x 4 = 28 24 8 x 3 = 7 x 3 = 24 21 6 x 2 = 9 x 2 = 12 18 5 x 2 = 2 x 2 = 4 10 Total Score 133 127 Therefore. 127).e. the location A should be selected for setting up of a new plant as the total score of location A (i. .e.

ENGINEERING 10 2 3 4 5 6 7 8 9 10 TOTAL COST (IN LACS) 11 12 200 . 3000 LACS. START LACS) MONTH ENGINEERING 10 200 MATERIALS 4 400 EQUIPMENT 8 1600 CONSTRUCTI 7 700 ON INSTALLATIO 4 100 N 1 2 2 3 9 ASSUMING EQUAL MONTHLY EXPENDITURES FOR THE ENTIRE DURATION OF PROJECT OF 12 MONTHS FOR EACH WORK PACKAGE COMPLETE A MONTHLY AND CUMULATIVE BUDGET WORK SHEET IN THE FORMAT GIVEN HEREUNDER: SR. NO. 5. 4. 2. 3. MONTHS EST. ON THE BASIS OF INDIVIDUAL WORK PACKAGES AS UNDER: SR. COST (RS. DUR. WORK PKG. 1. LACS 1 1.N O. WORK PACKAGE DURATION MONTHS MONTHS/AMOUNT RS. THE PROJECT ESTIMATOR HAS FURNISHED YOU WITH FOLLOWING SUMMERISED TIME AND COST ESTIMATES FOR THIS PROJECT.A PROJECT BEING SET UP NEAR BOMBAY FOR MANUFACTURING CHEMICALS HAS A TOTAL ESTIMATED PROJECT COST OF RS.

MATERIALS 4 400 3. CONSTRUCTION 7 700 5. INSTALLATION 4 100 MONTHLY AMOUNT CUMULATIVE AMOUNT 3000 . EQUIPMENT 8 1600 4.2.

Your project estimator has furnished you with the following summarized time and cost estimates for this project. This data can then be used to draw a graphic budget profile. No Work Package Duration Months Estimated Cost Start Month Rs.2640 lacs. ESTIMATING AND COST CONTROL A project budget is to be developed right at the early stage of a project. lacs 1 Engineering 10 200 1 2 Materials 3 160 3 3 Equipment 12 1920 5 4 Construction 10 300 5 . The profile of the cumulative budget over time period results in what we call S-Curve. on the basis of individual work packages. The total estimate cost as well as the budget cost of the project is Rs. Normally this requires breakdown of activities and associated costs of each activity per unit time and cumulative costs per time period. An export oriented project is being set up near Delhi for producing high-tech medical equipment.COST/SCHEDULE INTEGRATION – I COST MANAGEMENT.

15 . Complete a monthly and cumulative budget work sheet. 2. 1. using the form attached.5 Installation 4 60 Assuming equal monthly expenditures for the duration of each work package. You may use the enclosed worksheets for developing the cumulative budget over time. and the S-Curve. Prepare S-Curve for the cumulative expenditure for the project.

Materials 3. Budget Worksheet No Work Package Duratio n Months Start Month Months /Amounts in Rs. Installation 1 15 60 Monthly Amount Cumulative Amount --2640 . In Lacs 13 14 15 16 17 18 10 1 200 8 3 160 Equipment 12 5 1920 4. Engineering 2. Construction 10 5 300 5. 2 3 4 5 6 7 8 9 10 11 12 Total Costs Rs. Lacs 1 1.1.

VARIANCE & PERFORMANCE ANALYSIS OF A PROJECT THE FOLLOWING STATUS INFORMATION IS FURNISHED TO YOU ABOUT A PROJECT AT BOMBAY TO MANUFACTURE FINE CHEMICALS AT A PROJECT BUDGET OF RS. COST VARIANCE = BCWP – BCWS = = BCWP – ACWP = 1600 3. PROJ. 2640 LACS 2. DURATION (ORIG) = 18 MONTHS 3. PERFORMANCE INDICES. ACTUAL COST OF WORK PERFORMED (ACWP) = RS. – RS. 1200 LACS (EARNED VALUE) 5.CASE STUDY II EARNED VALUE. FORECAST DURATION AND FORECAST PROJECT COST AS UNDER: 1. COST PERFORMANCE INDEX (CPI) = EARNED VALUE (BCWP) . SCHEDULE VARIANCE 2. BUD.= 1400 BUDGET TO DATE (BCWS) 1500 1300 4. PROJ. BUDTD COST OF WORK PERFORMED (BCWP) = RS. 1600 LACS CALCULATE THE VARIANCES. DATA: AT THE COMPLETION OF 10 MONTHS FROM COMMENCEMENT OF THE PROJECT STATUS INFORMATION IS AS UNDER: 1. SCHEDULE PERFORMANCE INDEX (SPI) = EARNED VALUE (BCWP) ---------------------------------. 1500 LACS 4. BUDTD COST OF WORK SCHEDULE (BCWS) = RS. AS A PART OF PROJECT CONTROL THE PROJECT DEPARTMENT IS REQUIRED NOT ONLY TO CONTROL TIME BUT ALSO COSTS.2640 LAKHS FOR WHICH THE ORIGINAL PLANNED DURATION WAS 18 MONTHS.

5.X 100 ESTIMATED AT COMPLETION = .-------------------------------- = ACTUAL TO DATE (ACWP) 5. PERCENTAGE COMPLETE IN RELATION TO ESTIMATED COST AT COMPLETION = EARNED VALUE (BCWP) ------------------------------------.ESTIMATED DURATION AT COMPLETION = ORIGINAL DURATION ---------------------------= SPI 6. ESTIMATED COST AT COMPLETION = ORIGINAL BUDGET -----------------------= CPI 7. PROJECT COST OVERRUN = ESTIMATED COST AT COMPLETION MINUS ORIGINAL BUDGET = 9. PROJECT DELAY = ESTIMATED DURATION AT COMPLETION MINUS ORIGINAL DURATION = 8.

Debt-equity should be 2:1. Lakhs 15.00 30.6 lakhs.00 6. They have applied for a term loan to IDBI.00 32.00 26.Kwality Laboratories is a bulk drug manufacturing company which had purchased land of 4 hectares at Rs. Site development expenses were Rs. They are eligible for a State subsidy of 15% on fixed capital investment. The various details of the project are given as under: Project details Land Site Development Plant & Machinery Buildings Other fixed assets Preliminary Expenses Pre-operative expenses Working Capital Margin Rs.00 191.00 50.00 Calculate the project cost and the means of finance .00 40. A contingency provision is required to be made on buildings at 5% and on plant & machinery at 10%. 15 lakhs at Belapur MIDC.

50 + 19.00 .10 = Rs.60 Preliminary 32.10 Lakhs Hence total contingency is Rs.00 = Rs.60 Lakhs State subsidy on fixed investment of Rs.323.00 Site 6.50 Lakhs.21.Answer: Contingency at 5% on building cost of Rs. Cost of the Rs.2. 191.48.00 assets Contingencies 21.00 Lakhs = Rs.60 lakhs at 15% = Rs. 50.00 Other fixed 40.19.2.00 Development Plant & 191.50 Lakhs Contingency on P&M at 10% on Rs.00 Machinery Buildings 50. Project Lakhs Land 15.

term loans from financial institutions would be Rs.411.88.274.00 411.48.00 _26.60 x 2/3 = Rs.40 lakhs.70 lakhs as their contribution for the project.Expenses Pre-operative expenses Working Capital Margin TOTAL Project Cost 30.60 Since the debt-equity ratio prescribed for this project is 2:1. the promoters would have to bring Rs. The balance Rs. As there is a state subsidy of Rs.50 lakhs which is a part of the equity. MEANS OF FINANCE .20 lakhs will be equity.137.

00 945.00 Term Loans: Foreign currency loan 215. the next logical step is to find how best to finance it. all the available avenues should be evaluated and the means and pattern of financing should be fixed carefully.00 Public _375.00 from IDBI Rupee Term Loan from __90.Once the cost of the project has been estimated. Therefore.6 • Vista Pharmaceuticals Limited (Rs.00 IDBI State subsidy _15. The means of finance and the financing mix chosen are bound to have a far reaching effect on the profitability and also the risk associated with the project.00 305. In lakh) Means of Finance Equity Share Capital Promoters-Private 205.00 625.00 • Vorin Laboratories Limited .00 APIDC 45. The financing pattern of the companies mentioned in the previous section is given below: Exhibit 5.

00 446.175 .(Rs. In lakh) Means of Finance Promoters APIDC Public Issue Lease Finance 197.00 164.21 _65.21 • Natco Laboratories Limited (Rs. In Lakh) Means of Finance Equity Promoters Issue Debt 1.00 20.445 __730 2.

SCICI Term Loans from Banks .SBI .IFCI .ICICI .IRBI .710 400 200 ___15 4.Canara Bank Non-convertible Debentures (from Canbank Investment Management Services Ltd.Term Loans from Financial Institutions .) 875 250 200 250 __135 200 100 __100 1.IDBI .Corporation Bank .500 .

Mini Garments Limited Means of Finance: (Rs.12 100.00 200.12 . In lakh) Share Capital Promoters Public Issue Term Loan Subsidy 90.00 _10.12 ____0 90.

At 100% capacity utilization.85 and Rs. production is considered to be equal to sales and hence no adjustment is necessary for opening or closing stock. . 60% and 80% capacity per pieces of pants. That is. ii.130 per piece of pant. Rs. The selling price for Mini Garments was estimated to be Rs 250.190 and Rs.000 pieces of pants.125. That is. if the products’ price is controlled by the governments or the current market price and price trends in the past. Rejected material is expected to be sold at Rs. iii.14.06. projections of revenues and costs are made at today’s prices.28. the project is estimated (as shown in table below) to produce 1. The following points have to be borne in mind while estimating working results or profits: i. The sales realization at 50%. It is assumed that the impact of inflation on revenues will be offset by that on costs. Sales are generally estimated net of excise duty while commission paid to salesmen is shown as an expense in the income statement.875 pieces of shirts and 1. The unit is assumed to sell all that it produces.250 pieces of kids wear (excluding 5% rejected material). For products which are not manufactured in the country and are being imported. the landed cost of a similar imported product is assumed to be the selling price. the basis of assuming a selling price is the pricing pattern laid down by the government. Shirts and Kidswear respectively.Sales Estimation For products which are manufactured in the country. 1. shirts and kidswear levels is given in the table below.65 per piece of Pants. Rs. Adjustments are not made for inflation. shirt and kidswear.

06.625 1. and kidswear respectively determined as follows: Capacities at 100% levels Product No.25 375 1.875 and 1.500 5.35. .06.000 Shirts 30 6. of Pieces/ Pieces/da Pcs/annu Reject Pcs/annum Mix Machine Machine y (2 m @5% s used shifts) (300 days) Pants 40 5.The capacity of Mini Garments Limited at 100% levels was estimated to be 1. shirts.250 Its capacity utilization was estimated to be 50%.20.28.28. and 60% during 1 st and 2nd years and 80% from 3rd year onwards.000 6.875 Kids Wear 30 7. 1.14.14.50 450 1.000 6.000 1.750 1.00 400 1.000.12.250 pieces per annum of pants.

438 68.14.125 III Year onwards @ 80% capacity 91.The production capacity of the project is determined as follows: Product mix Production Capacity (Pcs/annum) Capacity I year @ II Year at 100% 50% @60% levels capacity Capacity Pants Shirts 1.000 53.875 57.06.200 85.000 1.500 .400 64.

950 1.28.02.250 64.600 .125 76.Kids Wear 1.

00 4. 85 lakh for 3 months @ 18% p.00 0.00 0.15 32.a.a. It has been assumed that interest on term loan and on bank borrowings is to be 18% p.00 18.75 IV 80.28.35 • Interest is calculated as follows: Rs.a.55 28. – Rs. 80 lakh for 3 months @ 18% p.00 1. – Rs.35 21.00 40.00 20. 90 lakh for 3 months @ 18% p. Term Loan is assumed to be repaid in 20 equal quarterly installments starting from beginning of the III year of operation.75* 35.00% Total Repayment I 100.00 12.00 80.00 II 100.00 20.15 V 60.00 18. In lakh) Year Opening Balance Amount Repaid Closing Balance Interest @ 18.00 0.00 20.00 20.95 VII 20.00 III 100.100 lakh and working capital loan (as calculated in the table-Margin Money for Working Capital) to be Rs.84 lakh during I and II year respectively and Rs.00 100.Mini Garments Limited has estimated term loan to be Rs.95 24. Rs.a. Based on the above estimates and assumptions Mini Garments interest schedule will be: Repayment and Interest Schedule of Term Loan (Rs.23.00 60.00 8.93 lakh and Rs.39 lakh from III year onwards.00 18.a.00 15.00 100.825 3.050 3. - 4.00 20.55 VI 40.00 18.00 20.38.600 .275 4. 95 lakh for 3 months @ 18% p.

iii. iv.9. ii.2.00 199.170.00 1. Land Site development Buildings and other civil works Plant and Machinery Imported 730 Indigenous 440 (Rs. the broad break up of which is given below: i.Lakh) 6.01 The cost of the project is estimated at Rs.00 4.00 . Cost of the Project 9.043 lakh.

x.50 % ICICI 18. viii. vii. xi. The company proposes to maintain a debtequity ratio of 1.00 ___62.2. ix.00 2.00 200.01 The loan component is proposed to be financed in the following manner: IDBI 37. Means of Financing 10.4% Banks .043 lakh is proposed to be financed using a combination of equity share capital.00 171. Technical know-how fees Expenses on Technicians Miscellaneous Fixed Assets Preliminary Preoperative Expenses Provision for Contingencies Margin Money for Working Capital (See Appendix 4) 100.57:1 10.043 10.0% 18. vi. treated as subsidy.00 35.00 16.v.00 The project cost of Rs.0% IFCI 26.00 80.

10. Profitability 11.01The major assumptions underlying the estimates of cost of production and profitability are given below: i. The balance is to be raised from the public.092 lakh per 1.200 Lakh.000 tpa of glazed ceramic floor and wall tiles.81.3 The project is eligible for a state government subsidy of Rs. . The installed capacity of the plant would be 14. The selling price was estimated to be Rs. 10. Capacity utilization would be assumed as follows: First year 70% Second year 80% Third year 90% iii. 11.15 Lakh. ii.2 24% of the equity share capital will be brought by TIDCO. while the promoters are expected to contribute 25%. Requirement of raw material at full capacity utilization has been estimated at Rs.000 tonnes.

II year and III year respectively. viii.20 Lakh vi. Repairs and maintenance has been estimated at2% of gross block during I year 2.16 Lakh and III year: Rs.5% of gross block during III year vii. 11% and 3.12 Lakh. Wages including benefits.13 Lakh. Depreciation. plant and machinery and miscellaneous fixed assets. has been provided on straight line basis at 3%.24 Lakh respectively in I year. ix. . x.34% on buildings. during the III year has been estimated at Rs. for the purpose of projections. II year: Rs. Selling expenses have been assumed to be 3.5% of gross block during II year 3.The cost of packing material at full capacity utilization has been estimated at Rs. Administrative and other overheads has been estimated at Rs.18 Lakh and Rs.7% of sales. Estimation of power and fuel cost: I year: Rs.4 Lakh.iv.28 Lakh. Escalation of 5% every year has been considered. v. Rs.

2 months provision of debtors. xiv.Estimates of margin money for working capital are based on 2 months provision for raw materials.000 tpa. xv. Bank finance for working capital required has been assumed to be 75% for raw materials. 7 days stock of work-inprogress.000 tonnes. Salaries during III year has been estimated at Rs. Dividends of 20% are assumed to be payable from the third year. Working Notes: i.xi. Term loan is repayable in 16 equal half-yearly instalments from the beginning of the 3rd year from the sanction of loan amount. xii.81. packing materials. finished goods and debtors. For work-in-progress. 1 month stock of packing materials. Rs.11 Lakh and an escalation of 5% every year has been assumed. Interest payable on term loan has been considered as 14% and on bank borrowings at 18%. Number of working days have been assumed to be 300 and shifts/day to be 2. xiii. 1 month stock of finished goods. 1 month provision of working expenses.092 lakh per 1. . Sales realization: 100% capacity 14. bank finance has been assumed to be 60%.

III.23 12.200 908.Ye ar I.800 794.70 11. Capacit Raw material cost y (Rs. II. Raw material cost: Year I.600 1021.29 9.76 ii. II. Capa city 100% 70% 80% 90% Production Cost (Rs. (tones) Lakh) 14. Other expenses: . III. Lakh) 100% 200 70% 140 80% 160 90% 180 iii.000 1135.

Lakh Allocation Cost Pre Continge before op.Year Packing material cost (Rs. Repayment Schedule of Term Loan Value after capitalization (Rs. ncies allocat Exp ion s.20 technical know-how) 98 Miscellaneous fixed assets 80 10. II. In Lakh) 10.3 8.83 1559 200. 1270 163.66 1574. III.6 21. 171.20 3.00 00 v. Lakh) I.16 1930.60 iv.97 9 Plant & machinery (incl.00 . Capitalization of pre-operative expenses and contingencies: Rs. 140.18 99. Land and Site Development 10 Buildings 199 25.80 3. 2.00 246.

00 70.00 5.00 780.72 III 1248.00 156.14 205.00 156.00 0.00 e % 1248.72 II 1248.00 0.46 161.98 226.00 156.00 312.50 292.66 270.00 468.00 156.00 156.30 X 156.34 0 * 314.14 IX 312.98 VIII 468.00 156.72 0 174.00 92.82 248.00 114.50 V 936.00 156.00 136.00 27.00 156.46 .82 VII 624.00 936.00 0.72 0 Total Repayme nt 174.0 174.34 IV 1092.00 49.00 1248.0 158.0 174.66 VI 780.00 156.00 1248.00 1092.Year I Opening Amoun Closin Interes Balance t g t Repaid Balanc 14.30 183.00 624.

Each semi-annual instalment = Rs.50 I Year II Year III Year Wor Ba Mar Wor Ba Mar Wor Ba Mar king nk gin king nk gin king nk gin Cap Fin Mo Cap Fin Mo Cap Fin Mo ital anc ney ital anc ney ital anc ney e e e 75 23.3 17.3 4 0.6 20.2 6 0. 7.1 0. In Lakh) Parti Requir Ban cular ement k s (Mont Fina hs) nce % Raw mate rials Packi ng 2.8 26.34 Working Notes: Computation of Working Capital and Margin Money Requirements (Rs.158.35 0.45 0 0. 6.0 1.5 3 50 3 7 00 7 0 50 0 75 0.0 0.0 22.3 0 0. 5.6 30.78 Lakh Interest for the III year = 1170 x 14% x ½ + 1092 x 14% x ½ = Rs.1 1 .40 9 0.

216.7 11. 245.9 5. 134 50 . 40 6. 127 84 29 .mate rials Work -inprogr ess Finis hed good s Recei vable s Work ing expe nses Total 0.1 9. 34 33.8 0 2. 154 80 29 .00 75 20.0 0 8.59 3 3.8 27.0 0 53.65 0.31 71.0 3 15.9 1 0 0. 02 5.23 60 4.13 0.3 5 2. 170.0 23.83 8 2.5 3 1.2 3 0 20. 174 08 43 . 57 1.21 Working Capital required for the following is calculated as --Work-in-progress = Total operating cost – Depreciation .21 2.72 42. 151.2 4 1.00 75 132.3 0 1 17.6 4. 12 188.71 3 9.53 37. 45 99. 48 5. 90 62. 113 11 37 .00 0 8.9 0 1.0 0 11.

Bank Ltd.29 43. is given as under: Particulars Land & Land Development Building Plant & Machinery Furniture & Fixtures Misc..10 151.25 13. The estimated cost of project and means of finance as appraised by The Ahmedabad Urban Coop. vide their appraisal report dated 29th March. In lakhs 24. Fixed Assets Preliminary Expenses Pre-operative Expenses Contingencies Rs. 1994 for the purpose of granting term loan/Issue.35 242.06 4.04 .Finished goods Receivables = = Total operating cost + Salaries + Admn.09 6. Overheads – Packing materials – Depreciation COST OF THE PROJECT The project has been appraised by The Ahmedabad Urban Co-op. Overheads – Depreciation Sales Working expenses = Total operating cost – Raw material – Rent + Salaries + Admn. Bank Ltd.56 17.

00 MEANS OF FINANCING The company proposed to finance the project in the debt-equity ratio of 1:4.Margin for working capital (Based on working capital requirement for I Yr. WORKING CAPITAL .26 _ 520. of operation) Total 18.

2 51.8 4 26.1 3 4.25 25 6.41 16.6 6 11.35 MM (Rs.4 3 4.24 19.35 2. 1.9 6 12.0 2 67.6 7 4. Raw Materials Period MM Tota (month (%) l s) 1.42 5.9 58.2 119.8 18.06 4. Less: Creditors 1.4 4 BF MM Total BF 19.09 72.51 7.47 6.7 2 4.57 1.0 54. Processe d goods 0.8 2 16.4 4 29. lakhs) MM Total BF 22.8 24.55 1.86 8. Particular No s .17 16.26 24.54 73.2 9 6 89.84 14.0 2 14.0 25 44.8 8 33.5 2 22.9 5 8. Finished goods 0.50 25 13.78 2 38.36 29.8 3 12.1 21.69 5 44.6 4 10.2 5.2 3 3.Working capital requirements in the first three years are assessed as follows: Sl.5 105.50 25 25.55 64.4 97.57 12.0 8 6.6 7 90.71 4.89 22.34 33.6 3 5.14 18.57 14.0 25 .2 85.0 1 7.12 3.32 2. Receivabl es 1.1 0 2 78.

Land b. Provision for contingencies g. Plant and machinery d. Site development and building c. Promoters equity b.74 438. Miscellaneous Fixed Assets e.27 199.00 269.31 41. Margin Money for working capital (I Yr. Summarized Cost of Project a. in lakhs 1. Pre-operative expenses f. subsidy d.58 2.00 _50.00 30.6 0 6 7 1.60 _39.00 34. Govt.75 70.00 0 1 8 .) Rs. Term loan 90. Means of Finance a.91 51. Public issue c.

84 Plant and Machinery 214.40 Margin Money _57.00 Preliminary expenses 16.00 Miscellaneous Fixed Assets 238.00 1.50 Pre-operative expenses 69.439.68 . Cost of project Land 12.16 Buildings and Site Development 77.28 719.50 Contingency 34.

9 76.50 BF MM 32.11 36.52 12.41 9 0.30 10.94 0.66 40.39 BF III Year 0.43 27.50 75 BF 86.9 8 24.10 0.32 9.08 0.12 28 .0 75.8 59.25 II Year MM WC MM WC 21.59 64.0 7 34.00 75 Consuma ble 2.38 0.68 44. lakhs) Compone nt Month BF s (% ) I Year WC Raw material 2.1 51.12 6.97 8.2 5 129.94 38.6 101.11 51.46 18.44 21.00 75 Work-inprocess 0.Computation of Working Capital and Margin Money Requirements (Rs. 33 7.40 30.29 57.63 25.29 0.22 2 19.33 0.00 75 Debtors 0.76 4 14.36 38.8 97.35 .77 5 2 25.50 75 Finished goods 1.96 0 12.4 6 0.

3 229.68 lakhs .68 – 365 -175 = Rs.544.0 221.9 172.68 lakhs The means of finance are: Debt : Rs.179.e.00 lakhs Equity : Rs.321 Promoters’ contribution = 719.68 x 0.4 5 3 5 57.68 lakhs Rs.197.7 6 2.2 295.719.0 7 3 49.321 = 174. Rs.78 i.2 8 5 9 73.175. Means of Finance Given DER = 0.321 : 1 Total debt = 719.3 148.175 lakhs (rounded off to the nearest lakh) 1.