Remdial assignment

Submitted by:madhav Rajbanshi (19MBAJO228)

SEC d (MARKETING)
Ans no 1

Information extracted from case:

Current sales:Rs 360 million in (2013)

Expected sales: rs 1,100 million (2014)

Future projects and revenues and revenues:

-gas pipelines : cost rs 250 million

-revenues from sales to SEB is expected to be rs 120 million per annum

-additional revenue from transportation of lpg is rs 80 million per annum

-cash profit to sales ratios of 20% per annum for first 12 years and 17% per annum for the
remaining life of a project.
PARTICULARS YEARS CASH FLOWS IN CUMULATATIVE
-2MILLIONS CASH FLOWS (RS
MM.)

COST OF PROJECT (RS 250 0 -250 -250

MILLION)

REVENUE FROM SEB (RS 120 1 40 -210

MILLION)

REVENUE FROM OTHER 80 2 40 -170

USERS (RS MILLION)

TOTAL REVENUE (RS 200 3 40 -130

MILLION)

CASH PROFIT 20% FROM 1 40 4 40 -90

TO 12 (RS MILLION)

CASH PROFIT 17% FROM 35 5 40 -50

FROM YEAR 13 TO 20 (RS
MILLION)

AVERAGE CASH PROFIT(RS 37.6 6 40 -10

MILLION)
AVERAGE
INVESTMENT(RS 125 7 40 (PAYBACK) 30
MILLION)
ROI ARR 30.1% 8 40 70

9 40 110
 DISCOUNT RATE 15% 10 40 150

PVFA 12,15% 5.4206 11 40 190

PVFA 20,15% 6.2593 12 40 230
PVFA(20,12)15% 0.8387 13 34 264
PV OF CAS 216.82 14 34 298
PROFIT,YEAR 1
TO 12(RS
MILLION)
PV OF CASH 28.52 15 34 332
PROFIT 13 TO
20(RS MILLION)

NPV (RS -4.66 16 34 366

MILLION) 17 34 400
18 34 434
19 34 468
20 34 502
NPV -4.66
IRR 14.65%
PAYBACK
6 YRS AND 3 GREATER THAN
MONTH TO BE 6 YEARS

Question no 3.should the project be accepted and why?

-we can see from the previous slide than the NPV is negative and internal rate of return is less
than the expected rate of return.so we should not be accepted it.