BRIEF HISTORY OF THE COMPANY

INFOWIZ is leading strategic IT Company offering integrated IT solution. INFOWIZ is having rich
experience managing global clients across various business verticals and align IT strategies to
achieve business goals. The various accreditations that we achieved for every service, we offer
reflect our commitment towards the quality assurance.

INFOWIZ is a 8 years young organization which has won the NATIONAL AWARD for 2
consecutive years 2014-2015 & 2015-16 for BEST Industrial Training from Hon` able GOVERNER
of Punjab & Haryana Sh. Kaptan Singh Solanki. He is also the Chancellor of PTU & Punjabi
University. INFOWIZ is a member of Confederation of Indian Industry ( CII membership number
– N4654P ) & also with an ISO Certification. We have a global foot prints in providing the off
shore companies of US, UK, France, Ireland, Canada and Australia with quality and timely Web
and SEO services.
INFOWIZ is an organization which is established in the field of Web Development (PHP & .NET),
JAVA (Core as well as Advance), I-phone & Android Applications, Embedded systems (AVR, PIC
& ARM),Automation, ROBOTICS, Networking (MCSE, CCNA & RHSE) & in Mechanical.
Our skilled team of professionals make sure that the product is developed as per the
customer’s needs and keeping the customer informed about the development of their project
from time to time. We do not only emphasize on formulating an attractive solution to our
clients but also believe in providing a workable solution. INFOWIZ offers research based Search
Engine Marketing products that help achieve greater insights to customer’s online business.
Our Research & Development arm offers SEO tools for SEM professionals.
INFOWIZ also provides Technical Support & Consultancy to Software Companies like JIA Group,
Newzealand, Sagitech solutions Panchkula, Jarc infotech Mohali, Infonet Solution, Delhi etc.

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OUR TEAM:-
“A Ship is as good as the crew who sail her.”

Our Technical team of professionals handing, designing & delivering of projects has a strong
presence in the North India & the US. Our engineers are already working on the latest
technologies like I-Phone & Android Applications, Robotics, VLSI-VHDL, Embedded System,
Networking and Cloud computing.

1) Dr. Seema
(Managing Director)
She is the backbone of INFOWIZ and a woman with more than 9 year rich practical experience
who believes in taking up new ventures and projects.

2) Mr. kamaljot kansal

(Deputy Director)
A man who strongly feel that “Nothing is Impossible”. A very committed team leader who has
been professionally attached with Multinational companies for more than 18 years and has
lead the marketing teams in all states of North India.

3) Mr. Bonish singla

(Branch Manager)
A man who believes that “Honour Time & Place, then you will be honoured.” he has more
than 4 years solid industrial experience in a software companies & is very dashing and
innovative in his technical approach.

4) Ms. Urvashi
(Dean Academics)
A woman who believes that “Challenges are what make life interesting and overcoming them is
what makes life meaningful.” She has more than 3years experience in business development.

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5) Er. Nishant Goyal
(Manager)
A woman believes that “don’t wait for extra ordinary opportunities, seize common occasions
and make them great.” She has more than 4 years experience in marketing field.

6) Er. Kamal Garg

(Head & Technical Advisor at US Branch)
More than 10 years industrial experience in US and smooth handling of the entire US business.

7) Ms.Mandeep Kaur
(Center Head- US Branch)
A woman who firmly believes that “In life, where you reach largely depends upon where you
start.” She joined this branch in the year 2007 and has given her immense inputs in bringing the
company to its present status.

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 COURSES OFFERED BY COMPANY :-
For CSE/IT/MCA Professionals:-
Web Development in PHP with LIVE Projects
Web Development in .NET with LIVE Projects
JAVA (Core as well as Advance ) with LIVE Projects
Android Applications with LIVE Projects
Web Designing (Photoshop, Coral Draw)
C#, Console Applications, VB.NET, ASP.NET
MySQL, SQL, ORACLE
Networking (MCSE, CCNA, RHSE)
SEO (Search Engine Optimization)
For ECE/EE/EIE/ME/CIVIL Professionals:-
Robotics With Live Project
VLSI-VHDL with Live Project
Embedded System Design with Live Project
Microcontroller with Live Project
Microprocessor with Live Project
PCB Designing
AVR & PIC Family
PCB and layout designing
AUTOMATION with Live Project
Project development with ARM processors
CATIA, PRO-E, AUTOCAD, SOLID WORKS.
Our core strength is our timely, technically and cost effective project delivery. We also provide
customers with designs as per their demands. INFOWIZ also provide JOB Oriented Industrial
Training of 1 year and 6/4/2 Months in CSE, IT, ECE, EE, ME, Civil, BBA,BCA,MBA, MCA & also for
Non-technical students . We help students in building their career.

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 OBJECTIVES OF THE COMPANY

Objectives are the way of achieving motives for profit or social services. Main objectives given
in the “MEMORANDUM OF ASSOCIATION” are as follows :

• Improving work culture among employees.

• Increasing Productivity of work force.

• Customer service and customer satisfaction.

• Improve the work effectiveness.

• Continuous innovation.

• To ensure that enlarge proportion of its sales is directed towards the rural and urban
areas.
• To maximize the profits of the company.

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 CAPITAL BUDGETING

MEANING
Capital Budgeting is the process of making investment decisions in capital expenditure. A capital
expenditure may be defined as an expenditure the benefit of which are expected to be received
over a period of time exceeding one year.
The main characteristics of a capital expenditure are that the expenditure is incurred at one
point of time whereas benefits of the expenditure are realized at different points of time in
future. Capital expenditure involves non-flexible long term commitment of funds. Thus capital
expenditure decisions are also called Long-Term Investment Decision.Capital budgeting involves
the planning and control of capital expenditure.

DEFINITION:
R.M.LYNCH has defined capital Budgeting as, “Capital Budgeting consists of
employment of available capital for the purpose of maximizing the long term profitability of the
firm”.
Capital Budgeting is a many-sided activity. It includes searching for new and more
profitable investment proposals, investigating, engineering and marketing considerations to
predict the consequences of accepting the investment and making economic analysis to
determine the profit potential of each investment proposal.
Its basic features can be summarized as follows;
1. It has the potentiality of making large anticipated profits.
2. It involves a high degree of risk.
3. It involves a relatively long-time period between the initial investment.

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 NEED AND IMPORTANCE OF CAPITAL BUDGETING
Capital Budgeting means planning for capital assets. Capital Budgeting decisions are vital to any
organization as they include the decision to;
1. Whether or not funds should be invested in long term projects such as setting
of an industry, purchase of plant and machinery etc.,
2. Analyze the proposal for expansion or creating additional capacity.
3. To decide the replacement of permanent assets such as building and
equipments.
4. To make financial analysis of various proposal regarding capital investments
so as to choose the best out of many alternative proposals.

The importance of capital Budgeting can be well understood from the fact that an unsound
investment decision may prove to be fatal to the very existence of the concern. The need,
significance or importance of capital budgeting arises mainly due to the following.
1. Large Investments
Capital budgeting decisions, generally involves large investment of funds. But the funds
available with the firm are always limited and the demand for funds exceeds the resources.
Hence it is very important for a firm to plan and control its capital expenditure.
2. Long-term commitment of Funds
Capital expenditure involves not only large amounts of funds but also funds for long-term or
more or less on permanent basis. The long-term commitment of funds increases the financial
risk involved in the investment decision
3. Irreversible Nature
The capital expenditure decisions are of irreversible nature. Once the decisions for acquiring a
permanent asset is taken, it became very difficult to dispose of these assets without incurring
heavy losses.
4. Long-term Effect of profitability
The investment decisions taken today not only affects present profit but also the future
profitability of the business. A profitable project selection is fatal to the business.

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5. Difficulties of investment decisions
The long term investment decisions are more difficult to take because,
1. Decision extends to a series of years beyond the current
accounting period.
2. Uncertainties of future and
3. Higher degree of risk.
6. National Importance
An investment decision through taken by individual concerns is of national importance because
it determines employment, economic activities and economic growth.

7. Effect on cost structure

By taking a capital expenditure decision, a firm commits itself to a sizeable amount of fixed cost
in terms of interest, supervisors salary, insurance, building rent etc. If the investment turns out
to be unsuccessful in future or produces less than anticipated profits, the firm will have to bear
the burden of fixed cost.

8. Impact on firm’s competitive strength

The capital budgeting decisions affect the capacity and strength of a firm to face competition. It
is so because the capital investment decisions affect the future profits and costs of the firm.
This will ultimately affect the firms competitive strength.

9. Cost control
In capital budgeting there is a regular comparison of budgeted and actual expenditures.
Therefore cost control is facilitated through capital budgeting.

10. Wealth Maximization

The basic objective of financial management is to maximize the wealth of the shareholders.
Capital budgeting helps to achieve this basic objective. Capital budgeting avoids over
investments and under investments in fixed assets. In this way capital budgeting protects the
interest of the shareholders and of the enterprise.

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 STEPS IN CAPITAL BUDGETING
Capital budgeting is a complex process. It involves decision relating to the investment of current
funds for the benefit to be achieved in future which is always uncertain. Capital budgeting is a
six step process. The following steps are involved in capital budgeting;
1.Project generation
The capital budgeting process begins with generation or identification of investment
proposals. This involves a continuous search for investment opportunities which are compatible
with firm’s objectives.
2.Project screening

Each proposal is then subject to a preliminary screening process in order to assess whether it is
technically feasible, resources required are available, and expected returns are adequate to
compensate for the risks involved.
3.Project evaluation
After screening of project ideas or investment proposals the next step is to evaluate the
profitability of each proposal. This involves two steps;
a. Estimation of cost and benefit in terms of cash flows
b. Selecting an appropriate criterion to judge the desirability of the project.
4.Project selection
After evaluation the next step is the selection and the approval of the best proposal. In actual
practice all capital budgeting decision are made at multiple levels and are finally approved by
top management.
5.Project execution and implementation
After the selection of project funds are allocated for them and a capital budget is prepared. It is
the duties of the top management or capital budgeting committee to ensure that funds are
spend in accordance with allocation made in the capital budget.
6. Performance review
After the implementation of the project, its progress must be reviewed at periodical intervals.
The follow-up or review is made by comparing actual performance with the budget estimates.

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 OPERATING BUDGET AND CAPITAL BUDGET
Most of the large firms prepare two different budgets each year
1. OPERATING BUDGET

Operating budget shows planned operations for the forthcoming period and includes sales,
production, production cost, and selling and distribution overhead budgets. Capital budgets
deals exclusively with major investment proposals.

2.CAPITAL EXPENDITURE BUDGDET

Capital Expenditure is a type of functional budget. It is the firm’s formal plan for the
expenditure of money for purchase of fixed assets. The budget is prepared after taking in to
account the available production capacities, probable reallocation of existing resources and
possible improvements in production techniques. If required, separate budgets can be
prepared for each item of capital assets such as a building budget, a plant and machinery
budget etc.

OBJECTIVES OF CAPITAL EXPENDITURE BUDGET

The objectives of Capital Expenditure Budget are as follows.
1. It determines the capital projects on which work can be started during the
budget period after taking in to account their urgency and the expected rate of
return on each project.
2. It estimates the expenditure that would have to be incurred on capital projects
approved by the management together with the source or sources from which
the required funds would be obtained.
3. It restricts the capital expenditure on projects within authorized limits.

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 FACTORS AFFECTING CAPITAL INVESTMENT DECISIONS
The following are the four important factors which are generally taken in to account while
making a capital investment decision.
1. The Amount of Investment
In case a firm has unlimited funds for investment it can accept all capital investment proposals
which give a rate of return higher than the minimum acceptable or cut-off rate.

2. Minimum Rate of Return on Investment

The management expects a minimum rate of return on the capital investment. The minimum
rate of return is usually decided on the basis of the cost of capital.

3. Return Expected from the Investment

Capital investment decisions are made in anticipation of increased return in the future. It is
therefore necessary to estimate the future return or benefits accruing from the investment
proposals while evaluating the capital investment proposals.

4. Ranking of the Investment Proposals

When a number of projects appear to be acceptable on the basis of their profitability the
project will be ranked in the order of their profitability in order to determine the most
profitable project.

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 METHODS OF CAPITAL BUDGETING OR EVALUATION OF
INVESTMENT PROPOSALS
A business firm has a number of proposals regarding various projects in which it can invest
funds. But the funds available with the firm are always limited and it is not possible to invest
funds in all the proposals at a time. The most widely accepted techniques used in estimating
the cost returns of investment projects can be grouped under two categories;
1. TRADITIONAL METHODS (NON DISCOUNTED CASH FLOW)
a. Payback Period Method

2. MODERN METHODS (DISCOUNTED CASH FLOW)

a. Internal rate of Return Method
b. Profitability Index Method

TRADITIONAL METHODS (NON DISCOUNTED CASH FLOW)

A. PAY BACK PERIOD METHOD

The payback period method is the simplest method of evaluating investment proposals.
Payback period represents the number of years required to recover the original investment.
The payback period is also called Pay Out or Pay off Period. This period is calculated by dividing
the cost of the project by the annual earnings after tax but before depreciation. Under this
method the project is ranked on the basis of the length of the payback period. A project with
the shortest payback period will be given the highest rank.
METHODS OF COMPUTATION OF PAYBACK PERIOD
There are two ways of calculating the payback period.

a). When annual cash inflow is constant

The formula is find out the payback period if the project generates constant annual cash inflow
is;
Original cost of the project
Payback period = Annual cash inflow

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 Payback period = Total investment outlay/annual inflow
or
Payback period = months/total value * required value

Annual cash inflow is the annual earning (profit depreciation and after taxes) .

b). When annual cash inflow is not constant

If the annual cash inflows are unequal the payback period can be found out by adding up the
cash inflows until the total is equal to the initial cash outlay of the project.
ADVANTAGES OF PAYBACK PERIOD
1. Simple to understand and easy to calculate.
2. It reduces the chances of loss through obsolescence.
3. A firm which has shortage of funds find this method very useful.
4. This method costs less as it requires only very little effort for it.

DISADVANTAGES
1. This method does not take in to consideration the cash inflows beyond
the payback period.
2. It does not take in to consideration the time value of money. It
considers the same amount received in the second year and third year
as equal.

ACCEPTANCE RULE
The following are the Payback [P.B.Rules]
Accept P.B<cut-off rate
Reject P.B >cut-off rate
May Accept P.B<cut-off rate

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B. AVERAGE RATE OF RETURN (ARR) METHOD
This method otherwise called the Rate of Return Method, takes in to account the earnings
expected from the investment over the entire life time of the asset. The various projects are
ranked in order of the rate of returns. The project with the higher rate of return is accepted.
Average Rate of Return is found out by dividing the average income after depreciation and
taxes, i.e. the accounting profit, by the Average Investment.

ARR= Average Annual Earnings *100

Average Investment
Where;
Average Annual Earnings is the total of anticipated annual earnings after depreciation and tax
(accounting profit) divided by the number of years.

Average Investment means

i. If there is no salvage (Scrap value)
Total Investment

2
ii. If there is scrap value
Total Investment - Scrap Value
+ Scrap Value
2

iii. If there is additional working capital

Total Investment - Scrap Value/2 + scrap + working capital

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ADVANTAGES OF AVERAGE RATE OF RETURN (ARR) METHOD

1. It is easy to calculate and simple to understand.

2. Emphasis is placed on the profitability of the project and not on liquidity.
3. The earnings over the entire life of the project is considered for
4. ascertaining the Average Rate of Return.
This method makes use of the accounting profit.

DISADVANTAGES

1. Like the payback period method this method also ignores the timevalue of money.
The averaging technique gives equal weight to profitsoccurring at different periods.
2. This averaging technique ignores the fluctuations in profits of variousyears.
3. It makes use of the accounting profits, not cash flows, in evaluating theproject.

C. DISCOUNTED CASH FLOW METHODS

The payback period method and the Average rate of Return Method do not take in to
consideration the time value of money. They give equal weight to the present and the future
flow of incomes. The discounted cash flow methods are based on the concept that a rupee
earned today is more worth than a rupee earned tomorrow. These methods take in to
consideration the profitability and also the time value of money.

Discounted pay-back = initial cash outlays/discounted annual cash inflow

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II. INTERNAL RATE OF RETURN (IRR) METHOD
The Internal Rate of Return for an investment proposal is that discount rate which equates the
present value of cash inflows with the present value of cash outflows of the investment. The
Internal Rate of Return is compared with a required rate of return. If the Internal Rate of Return
of the investment proposal is more than the required rate of return the project is rejected. If
more than one project is proposed, the one which gives the highest internal rate must be
accepted.
It can be calculated by the following formula

P1-Q
IRR = L+ xD
P1-P2
Where,
L = Lower rate of discount
P1 = Present value of cash inflows at lower rate of discount
P2 = Present value at higher discount rate
Q = Initial Investment
D = Difference in rate
OR

Internal rate of return = base rate +surplus value/surplus + deficiency *

(percentage gap)

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ADVANTAGES OF INTERNAL RATE OF RETURN

1. It considers the time value of money.

2. The earnings over the entire life of project is considered.
3. Effective for comparing projects of different life periods and different timings in
timings of cash inflows.

DISADVANTAGES
1. Difficult to calculate.
2. This method presumes that the earnings are reinvested at the rate earned by the
investment which is not always true.

Accept or Reject Rule

Internal Rate of Return is the maximum rate of interest which an organization can afford to pay
on the capital invested in a project. A project would qualify to be accepted if Internal Rate of
Return exceeds the cut-off rate. While evaluating two or more projects, a project giving a
higher Internal Rate of Return would be preferred. This is because higher the rate of return, the
more profitable is the investment.

III. PROFITABILITY INDEX METHOD

Present Value of Cash Inflows

Profitability Index =
Present Value of Cash Outflows

This is also called Benefit-Cost ratio. This is slight modification of the Net Present Value
Method. The present value of cash inflows and cash outflows are calculated as under the NPV
method. The Profitability Index is the ratio of the present value of future cash inflow to the
present value of the cash outflow, i.e., initial cost of the project.
If the Profitability index is equal to or more than one proposal the proposal will be accepted. If
there are more than one investment proposals, the one with the highest profitability index.

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 FINANCING OF PROJECT

Project financing is considered right from the time of the conception of the project. The
proposal of the project progress working capital, so, in general a project is considered as a ‘mini
firm’ is a part and parcel of the organization.

Sources of Finance:
 Loan Financing
 Security Financing
 Internal Financing

Loan Financing:
(a). Short- Term Loans & Credits
Short – Term Loans & Credits are raised by a firm for meeting its working capital requirements.
These are generally for a short period not exceeding the accounting period i.e., one – year.

Types of Short Term Loans & Credits:

1. Trade Credit.
2. Installment Credit.
3. Advances.
4. Commercial papers
5. Commercial banks
6. Cash Credits
7. Over Drafts
8. Public Deposits.

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 (b) Term Loans:
Term loans are given by the financial institutions and banks, which form the primary source of
long term debt for both private as well as the Government organizations. Term loans are
generally employed to finance the acquisition of fixed assets that are generally repayable in less
than 10 years. In addition to short- term loans, company will raise medium term and long term
loans.
Security Financing:
Corporate Securities can be classified into two categories.
(a) Ownership Securities or capital stock.
(b) Creditor ship Securities or debt Capital.
(a) Ownership Securities or capital Stock:
Types of Ownership Securities or Capital Stock:
i) Equity Capital:
Equity Capital is also known as owner’s capital in a firm. The holders of these shares are the real
owners of the company. They have a control over the working of the company. Different ways
to raise the equity capital.
o Initial public offering.
o Seasoned offering
o Rights issue.
o Private placement
o Preferential allotment.
ii) Preference Capital:
These shares have certain preferences as compared to other type of shares.
1. Payment of Divided
2. Repayment of the capital at the time of liquidation of the
company.

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Creditor ship Securities:
Debentures:
Debentures are an alternative to the term loans and are instruments for raising the debt
finance. Debenture holders are the creditors of a company and the company and the company
have the obligations to pay the interest and principal at specified times. Debentures provide
more flexibility, with respect to maturity, interest rate, security and repayment Debentures
may be fixed rate of interest or floating rate or may be zero rates. Debentures & Ownership
Securities help the management of the company to reduce the cost of capital.

Internal Financing:
A new company can raise finance only through external sources such as shares, debentures,
loans and public deposits. For existing company they need to raise funds through internal
source.Such as retained earnings depreciation as a source of funds. Some other innovative
source of finance
 Venture Capital
 Seed Capital
 Bridge Finance
 Lease Financing
 Euro- Issues

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 REVIEW OF LITERATURE:-

The concept of Capital Budgeting being a very sensitive area of finance has outreached the
attention of many researchers .A number of studies has been conducted on the subject.
However briefing such studies will highlight the importance of the present study. It should
safeguard to avoid the wrong choice of the project and investment to be made. It is necessary
for the management to give proper attention to capital budgeting.
The reason for the popularity of Payback period in the order of significance were stated to be
its, simplicity to use and understand, its emphasis on the early recovery of investment and
focus on risk. It was also found that one third of companies always insisted on the
computations of Payback periods for all projects. For about two-third companies standard
Payback period ranged between three and five years.
The reason for the secondary role of Discounted Cash Flow techniques in India included
difficulty in understanding and using these techniques, due to lack of qualified professional and
unwillingness of top management to use Discounted Cash Flow techniques.

1. Rao U (1996); Capital budget practices: A comparative study of India and select South East
Asian Countries, ASCI Journal of Management, Volume 25, pp 30-46, survey of 74 Indian
companies revealed that 51% use IRR as project appraisal criterion. Firms typically use (92% or
more) multiple evaluation methods. ARR and PBP are widely used as supplementary decision
criteria.
2. Babu Prabhakara C and Sharma Aradhana (1996), Capital budgeting Practices in Indian
Industry, ASCI Journal of Management, Volume 25, 1996, had done an empirical study on
capital budgeting practices in Indian Industry. The authors have conducted a survey of 73
companies in and around Delhi and Chandigarh. They used personal interview method. It has
been found by them that 90% of companies have been using capital budgeting methods.
Around 73% of the companies have been using DCF methods.

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3. Jain P K and Kumar M (1998), “Comparative Capital Budgeting Practices: The Indian
Context”, Management and Change, January-June, pp. 151-171, has done a comparative study
of capital budgeting practices in Indian context and observed that 25% of sample companies
invested for expansion and diversification and firms were making regular investments for
replacement and maintenance.
4. Stanley B(2000), Integrating traditional capital budgeting concepts into an international
decision-making environment, The Engineering Economist, 2000, volume 45, Number 4, pp 309-
325, has analyzed the capital budgeting policies of 146 multinational companies in light of
current financial theory.
5. Ryan, P.A. and Ryan, G.P. (2002), “Capital budgeting practices of Fortune 1000: How have
things changed?” Journal of Business and Management, Vol. 8 (4), pp. 355-364, this study
focused on the changed trend in using the capital budgeting techniques, in past years
importance was given to the traditional method of capital budgeting like PBP, ARR etc but
changing trend shows the diversification of traditional techniques to modern techniques like
NPV, PI & IRR.
6. Sandahl, G. and Sjogren, S. (2003), “Capital budgeting methods among Sweden’s largest
groups of companies. The state of the art and a comparison with earlier studies”, International
Journal of Production Economics, Vol. 84 (1), pp. 51-69, according to earlier studies on capital
budgeting techniques like payback period & average rate of return were the most used
methods for evaluating the capital projects.
7. Lazaridis T.(2004), Capital budgeting practices: A survey in the firms in Cyprus, Journal of
small business management 2004 42(4), pp. 427-433, had done a survey of capital budgeting
practices of the firms in Cyprus. He found that only 30.19% of the sample firms use capital
budgeting techniques for all their investment decisions, while 50.94% of the firms use
evaluation methods for only some types of investment above a certain cost level.
8. Eva Liljeblom and Mika Vaihekoski (2004),investment evaluation methods and required rate
of return in finish publicly listed companies, January 8, 2004, conducted a survey of 144
companieslisted on the Helsinki Stock Exchange to examine the practice of the use of
investmentevaluation methods and required rate of return in Finnish.

22
9. Hermes, N. et.al. (2006),"Capital Budgetting Practices: A comparative Study of the Netherlands
and China," University of Groningen, Research Institute SOM (Systems, Organisations and
Management) in its series Research Report with number 06E02, compared the use of capital
budgeting techniques of Dutch and Chinese firms, using data obtained from a survey among
250 Dutch and 300 Chinese companies.
10. Partington G. and Peat M. (2006), “Cost of Capital Estimation and Capital Budgeting practice
in Australia,” Available from: surveyed Australian firms which revealed that real options
techniques have gained a toehold in Australian capital budgeting but are not yet part of the
mainstream. Projects are usually be evaluated using NPV.
11. Gupta Sanjeev et.al. (2007), “Capital Budgeting Practices in Punjab-based Companies, The
ICFAI Journal of applied finance, February 2007, Vol. 13, No.2, pp. 57-701, has made an attempt
to explore which capital budgeting techniques is used by industries in Punjab, and the influence
of factors such as size of capital budget, age and nature of the company, and education and
experience of the CEO in capital budgeting decisions.
12. Agarwal N. P. andMishra B.K. (2007), Capital Budgeting, Jaipur: RBSA Publishers, The book is
classified into 9 chapters which covers introduction to capital budgeting, project formulation,
condition of certainty & uncertainty of risk. Meaning & definition of capital budgeting is
covered along with its features, importance, types & procedures. Project identification &
formulation is also effectively explained.
13. Khan M.Y. and Jain P. K. (2008),Management Accounting: Text, Problems and Cases, New
Delhi: The McGraw-Hill Publishing Company Ltd., capital budgeting chapter of this book deals
with the discussion of the principles & techniques, meaning, importance, difficulties, rationale
& types.
14. V.K Saxena and VashistC. D. (2010), Essentials of Financial Management, New Delhi: Sultan
Chand& Sons Educational Publishers, chapter capital budgeting of this book covers all the
learning objectives. It helps students, investors and researchers in most efficient manner in
understanding the meaning of capital budgeting, selection criteria of a project, various concepts
along with its limitations.

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 Objectives of the study:-

1. Determination of proposal and investments inflows and out flows.

2. To determine the process of making investment decision of the company.

3. To determine the benefits which are expected to be received over period of time..

4. To determine the effect of investment decision on the profitability of the concern.

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 SCOPE OF THE STUDY:-

1) This study highlights the review of capital budgeting of management of the company.
Such long term planning and control of capital expenditure is called Capital Budgeting.
2) The study also helps to understand how the company estimates the future project cost.
3) The study also helps to understand the analysis of the alternative proposals and
deciding whether or not to commit funds to a particular investment proposal whose
benefits are to be realized over a period of time longer than one year.
4) The capital budgeting is based on some tools namely Payback period, Average Rate of
Return, discounted cash flows and Internal Rate of Return.

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 RESEARCH METHODOLOGY
Research methodology is a design to systematically solve the research problem or the methods
that are used in research the purpose of the research methodology is to describe the research
procedure.
"Research Methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically."

RESEARCH DESIGN
Research Design is an arrangement of conditions for collection and analysis of data in a manner
that aims to combine relevance to the research purpose with economy on procedure. The
research problem having been formulated in clear-cut term helps the researcher to prepare a
research design.

TYPE OF THE RESEARCH:

Descriptive research:
Descriptive research includes surveys, facts, finding and inquiries of different kinds. The major
purpose of descriptive research is description of the state of affairs as it exists at present.. In
social science and business research the quite often term used for descriptive research is Ex-
Post research. So present research was a Descriptive research.

26
 COLLECTION OF DATA

Secondary Sources:
This data is from the number of books and records of the company, the annual reports
published by the company and other magazines. The secondary data is obtained from the
following.
a. Collection of required data from annual records, monthly records, internal
Published book or profile of “INFOWIZ CO.”.
b. Annual Reports of the company.

27
 DATA ANALYSIS AND INTERPRETATION
EVALUATION OF PROJECT USING CAPITAL BUDGETING TECHNIQUES
PROJECT EVALUATION
Name of the Project: Baggaging plant with handling system .
Project Estimate: Ventured into the market and got a quote for 300 Cr.
Project Cost: 300 Cr
Assumption: The Company has currently a dispatch mechanism which is mechanized for
dispatching or bagging 3,300 MT/day. The company plans to increase its production level to 16,
00,000 MT/annum. So, the dispatch system should be increased to an additional 1,550 Mt/day
so that the total dispatching to be done per day goes up to 4,850Mt/day. So, as to ensure the
smooth functioning of the dispatching system and this can be done by setting up a new
baggaging plant…
Present Capacity-3,330MT/day
New Capacity - 4,850MT/day
Difference or excess production - (4850-3300)MT/day=1,550MT/day

STEPS IN THE EVALUATION OF THE PROJECT

STEP1:Capital Budget Estimates :
The first and the foremost step in the evaluation of a project is the budget estimate of the
project. And here the estimate of the project is 300 crores.
This includes:-
1. Extension of Bagging Plant.
2. Conveyor System for extended portion of Bagging plant.
3. Shed for covering extended Bagging Plant.
4. Railway siding modification.
5. Shed for covering extended portion of Bagging plant.

28
STEP 2:Project Finance and Source of Funds:
The second step in the evaluation of the project is to find the funds to install or to establish a
project;
1. Debt/Loan Funds/Long term Loans.
2. Internal Generation of funds.
In this project we have funding of 75% from a bank at 11% rate of interest P.a. providing with
long term loans and the rest 25% from Internal generation. With a moratorium of one year and
repayment schedule of 5 years.

STEP3:Phasing of Capital Expenditure:

The third step in the evaluation of the project is the phasing of the expenses or expenditure on
the project. And here the phasing of the project expenditure is as be.

PHASING OF CAPITAL EXPENDITURE (Rs in crores)

2012-13 2013-14 2014-15 Total
Bank Loan 50.00 100.00 75.00 225.00
Interest On long term loan 6.88 32.90 15.40 55.17
Internal Generation 20.00 35.00 20.00 75.00
Total value Of the project 76.88 167.90 110.40 355.17

29
2.REPAYMENT OF LONG TERM LOAN

REPAYMENT OF LONG TERM LOAN(LTL) Rs in

crores
2012-13 2013-14 2014-15 2015-16 2016-17
Interest Repaid 6.88 32.90 29.15 22.55 15.95
Principal Repaid 0 12.5 60.00 60.00 60.00
Total 6.88 45.40 89.15 82.55 75.95

interest paid

2012-13
2013-14
2014-15
2015-16
2016-17

Repayment of long term loan

30
STEP5:PREPARING THE PROFITABILITY STATEMENT OF THE PROJECT:
The fifth step in the evaluation of the project is preparing the profitability statement of the
project and the profitability statement of the project here :
PROFITABILITY STATEMENT OF THE PROJECT (Rs in
Crores)
2012-13 2013-14 2014-15 2015-16 2016-17
Incremental Sales 1534.50 1534.50 1534.50 1534.50 1534.50

TOTAL REVENUE("A") 1534.50 1534.50 1534.50 1534.50 1534.50

EXPENDITURE
Raw Materials 1227.60 1227.60 1227.60 1227.60 1227.60
Interest On Loan 13.75 22.55 15.95 9.35 2.85
Insurance 7.10 7.10 7.10 7.10 7.10
Salary and Wages 10.66 10.66 10.66 10.66 10.66
Contract Employees 7.10 7.10 7.10 7.10 7.10
Repairs and maintenance 10.66 10.66 10.66 10.66 10.66
Hard ware and soft ware 17.76 17.76 17.76 17.76 17.76
material
Packaging Cost 1.78 1.78 1.78 1.78 1.78
Power 17.76 17.76 17.76 17.76 17.76

TOTAL EXPENDITURE ("B") 1314.16 1322.96 1316.36 1309.76 1303.26

PROFITS BEFORE 220.34 211.54 218.14 224.74 231.24

DEPRECIATION AND TAX
"C"(C=A-B)

Less:DEPRECIATION "D" 18.65 18.65 18.65 18.65 18.65

PROFIT BEFORE TAX "E"(E=C-D) 201.69 192.89 199.49 206.09 212.59

Less:TAX(AS PER IT ACT) 60.77 58.34 60.16 61.98 63.77

PROFIT AFTER TAX 140.93 134.55 139.33 144.11 148.82

31
Computation of tax:
COMPUTATION OF TAX
2012-13 2013-14 2014-15 2015-16 2016-17
Profit Before Tax(PBT) 201.69 192.89 199.49 206.09 212.59

Add:Depreciation(As Per 18.65 18.65 18.65 18.65 18.65

Companies Act)
TOTAL 220.34 211.54 218.14 224.74 231.24

Less:Depreciation (as Per IT Act) 33.05 31.73 32.72 33.71 34.69

Profit After Depreciation 187.29 179.81 185.42 191.03 196.55

TAX 60.77 58.34 60.16 61.98 63.77

COMPUTATION OF TAX

32
STEP 6:Valuation of the Asset:
The sixth step in the evaluation of the project is the valuation of the project at different time
or at different periods at different years to come in the future.

VALUATION OF THE ASSET

(Rs In Crores)
2012-13 2013-14 2014-15 2015-16 2016-17

Opening Balance 0.00 301.90 256.61 218.12 185.40

Addition 355.17 0.00 0.00 0.00 0.00

Total 355.17 301.90 256.61 218.12 185.40

Less:Deletion 0.00 0.00 0.00 0.00 0.00

Total 355.17 301.90 256.61 218.12 185.40

Less:Depreciation 53.28 45.28 38.49 32.72 27.81

ClOSING BALANCE 301.90 256.61 218.12 185.40 157.59

33
STEP7:Preparation of Cash Flow Statement:
The seventh step in the evaluation of the project is the preparation of the Cash Flow Statement.
And we need the cash flows to find out the Payback Period and the Internal Rate of Return of
the project
CASH FLOW STATEMENT
2012- 2013-14 2014-15 2015-16 2016-17
13
Cash Out Flow
Capital Expenditure on the Project 76.88 167.90 110.40
Cash In Flow
Incremental Profit After Tax 140.93 134.55

Step8:To Find the Viability of the Project by Using Different Techniques Of

Capital Budgeting: Here in Prathi the Techniques of capital budgeting used are :

1. Pay-Back Period Method

2. Internal Rate Of Return

34
1.Evaluation of the Project Using Pay Back Period Method:
It was estimated that the cash in-flows will start from 2015-2016
Cost of the Project- 355.18 Cr
Year 2012-13 2013-14 2014-15 2015-16 2016-17
Cash inflows
(Amount) 140.93 134.55 139.33 144.11 148.82

Calculation Of Pay Back Period:

S.no Year Cash Inflows Cumulative Inflows
1 2012-13 140.93 140.93

2 2013-14 134.55 275.48

3 2014-15 139.33 414.81

4 2015-16 144.11 558.92

5 2016-17 148.82 707.74

cash inflows

2012-13
2013-14
2014-15
2015-16
2016-17

35
 PAY BACK PERIOD

(a) Cash Outlay : 355.18 Cr

(b) Payback Period : INITIAL INVESTMENT

ANNUAL CASH FLOW
79.70
= 2 +
414.81

= 2.2 years

Pay Back Period:

It is assumed that the profit earning of the project will start from 2015-2016. We should
increase this period with same exception as there may be any additional factor and other cause
so rounding of 2.2 to 3 years will be right, so that it will give more assistanceto the calculation.
Interpretation : Any project which has a pay-back period of 3 to 5 years is considered as a
good project…And here we have got a pay-back period of 2.2 years. So, the project can be
consider.

36
2.Evaluation of the Project Using Internal Rate of Return Method:
It was estimated that the cash in-flows will start from 2015-2016
Cost of the Project- 355.18 Cr
Year 2012-13 2013-14 2014-15 2015-16 2016-17

Amount 140.93 134.55 139.33 144.11 148.82

Internal Rate of Return
Discount rate taken as 24% (in crores)
Present Values
S.No Years Cash Inflows DCF (24%) of Inflows(in cr.)
1 2012-13 140.93 .806 113.58

2 2013-14 134.55 .660 88.80

3 2014-15 139.33 .524 73.00

4 2015-16 144.11 .422 60.81

5 2016-17 148.82 .341 50.74

Total Present Values of Inflows 386.93

cash inflows

2012-13
2013-14
2014-15
2015-16
2016-17

Internal rate of return

37
Discount rate taken as 26% (in crores)
Present Values
of Inflows(in
Sl.No Years Cash Inflows DCF (26%) cr.)
1 2012-13 140.93 .787 110.91

2 2013-14 134.55 .620 83.421

3 2014-15 139.33 .488 68.00

4 2015-16 144.11 .384 55.34

5 2016-17 148.82 .302 50.74

Total Present Values of Inflows 366.412

cash inflows

2012-13
2013-14
2014-15
2015-16
2016-17

Rate of present values

38
Discount rate taken as 28%(in crores)
Present Values
Sl.No Years Cash Inflows DCF (28%) of Inflows
1 2012-13 140.93 .781 110.06

2 2013-14 134.55 .600 80.73

3 2014-15 139.33 .465 64.78

4 2015-16 144.11 .361 52.02

5 2016-2017 148.82 .279 41.52

Total Present Values of Inflows 349.11

cash inflows

2012-13
2013-14
2014-15
2015-16
2016-17

39
Calculation of Internal Rate of Return

IRR = L+ A - Cash out lay X (H – L)

A-B

= 26+ 355.18 - 349.123 X (28-26)

(355.18-349.123) + (366.412- X 2
355.18)

= 26 + 6.07 X 2

6.07+11.232

= 26 + 0.350 X 2
= 26.70

Internal Rate of Return (IRR):

In this calculation, is done on the basis of trail and errors. By taking various percentage of
(DCF).So that an appropriate percentage of Internal Rate of Return can be judge out. Calculated
figure is 26.70%, so we can take it as 30% because at market Uncertainity.
Interpretation:
Any project which has an Internal Rate of Return Between 16% to 20% is considered as a good
project…And here for this project the Internal Rate of Return is 26.70%. So, the project can be
considered.

40
 FINDINGS:

1 It was found that the payback Period of the project is 2.2 year.
2 The Payback Period shows that the initial investment can be recovered within a short
period of time.
3 The investment is ideal because normally an investment should be recoverable within 2.2
years.
4. The Internal Rate of Return shows 26.70 % This also ensures a profitable investment.

41
 SUGGESTIONS:
1. The company may fix the time period for the capital asset for replacement.
2. The company may effectively use the available resources for attaining maximum profit.
3. The company has to analyze the proposal for expansion or creating additional capacity.
4. The company may plan and control its capital expenditure.
5. The company has to ensure that the funds must be invested in long term project or not.
6. The company may evaluate the estimation of cost and benefit in terms of cash flows.

42
 CONCLUSION
Capital Budgeting is concerned with the problems that arise in attempting to manage the
total profit and net investment and the interrelationship that exists between them. The
major investments include issued capitals .The goal of Capital Budgeting is to manage the
firm’s total profits and net investment in such a way that a satisfactory level of Capital
budgeting is maintained.
The majority of the company maintain relatively lower cash/bank balances. Marketable
securities are yet to emerge as a popular means of cash management. The excess cash is
deployed to retire short term debt/ in short term bank deposits.

43
 BIBLIOGRAPHY:

Financial Management - I. M. Pandey

Financial Management - M. Y. Khan & Jain

Financial Management - Shashi.K.Gupta, R.K.Sharma and Neeti gupta

INFOWIZ COMPANY A SOFTWARE SOLUTIONS profile & Annual Reports

Web Sites:

URL: http://www.google.com

URL: http://www.Wikipedia.com

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Profit and Loss Statement(2012-2017) (In Lacs)
Working results 2012-13 2013-14 2014-15 2015-16 2016-17
Sales 119793 120663 94368 119831 128297
Subsidy 86276 124527 417077 178583 222170
Other Income 652 3487 49530 18153 12597
Total 206721 248677 560975 316927 363064
Cost Of Sales(including prior
period adj but excluding Dep 187719 230047 484485 288612 327032
and Interest)
Gross Margin (19002) (18630) (76490) (28315) (36032)
Depreciation 3402 3817 3347 3048 2470
Profit/(loss) before Int and 15600 14813 73143 25267 33562
Taxes
Interest 4613 6387 5262 7294 9644
Profit/(loss) before taxes 10987 8426 67881 17973 23918
Taxes including FBT 59 70 14170 6187 8278
Debit/(Credit) for deferred --- --- --- (3369) 1332
tax
TaxationExpenses Credited --- --- --- --- (3400)
NET PROFIT/(LOSS) 10928 8356 53711 15155 17708

45
Balance Sheet (2012-2013 to 2016-2017)(in lacks .)
Particulars 2012-13 2013-14 2014-15 2015-16 2016-17
Sources of Funds:
Auth share capital 100000 100000 100000 100000 100000
Paid up capital 57545 57545 57545 57545 57545
Reserve and surplus --- --- --- 10791 28500
Secured loan 13619 2785 85072 104307 113987
Unsecured loan 76475 75788 42725 8329 ---
Total sources of funds
147639 136118 185342 180972 200032
Application of Funds:
Gross Block(including CWIP)
73251 75734 77436 79349 83178
Net Block(including CWIP)
26887 25706 24149 23652 25419
Investments --- --- 82130 605 5
Deferred tax Assets --- --- --- 3369 2037

Current Assets
Inventories 28595 21496 55159 37363 50023
Sundry Debtors 68236 56541 86632 60052 51764
Others 6130 47507 103523 117391 107567

Total 102961 125544 245314 214806 209354

Current Liabilities and
Provisions 48770 73207 170615 61460 36783
Net Current Assets 54191 52337 74699 153346 172571
Deferred Revenue Exp 131 --- --- --- ---
Accumulated Loss 66430 58075 4364 --- ---
TotalApplication(funds) 147639 136118 185342 180972 200032

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