SFM Imp Q ... thari.

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Page 11 of 393
CA Final SFM CA Mayank Kothari

1. Capital Budgeting

No.1. Question Reference

1 2. XYZ Ltd. an infrastructure company is evaluating a PM_Q13_2.11
proposal
and transfer
to build,aoperate
section of 35 km of road at a project cost
of `200 crores
financed as to be
Equity share capital `50 crores, loans at the interest rate
follows.
of 15% p.a.
financial from
institutions `150 crores. The project after
completion
traffic and awill
tollbewillopen
be collected
to for a period of 15 years
the road. The company
from the vehicles using is also required to maintain the
road during
years and afterthetheabove 15
completion of that period, it will be
handed
zero value.
overIt to
is estimated
NHAI at that the toll revenue will be
`50 annual
the crores toll
per collection
annum and expenses including
to
maintenance of roads will The
5% of the project cost. company considers
amount
writing
the off the
project in 15total cost
years onofa straight line basis. For
corporate
the company incomeis allowed
tax purposes
to take depreciation @
The
10% financial
on WDV institutions
basis. are agreeable for the
repayment
annual instalments-
of the loan consisting
in 15 of
principle and
Calculate interest.
project IRR and equity IRR.
2 3. A
Ignore
manufacturing
corporateunit tax. engaged in the production of PM_Q12_2.9
automobile
considering
partsaisproposal of purchasing one of the two
given
plants, details of which are
below: Plant A Plant B
Cost `20,00,000 `38,00,000
Installation Charges `4,00,000 `2,00,000
Life 20 years 15 years
Scrap Value after Full Life `4,00,000
`4,00,000
Output per minute (units) 200 400

1|P
PM- Practice Manual Oct 2018, SM –
SUPP- Supplementary ge
Study Material
Page Dec / Module,
11 2019, 393
SUGG- Suggested Answers