Answer:1

For the purpose of this question, below information has been given:

C0 = 30000, C1 = 14000, C2 = 8200, C3 = 12000, C4 = 15000, C5 = 22000

r = 10%

k = 15%

By using the below formula :

NPV = {[CI1 / (1 + k)^1] + [CI2 / (1 + k)^2] + [CI3 / (1 + k)^3] + [CI4 / (1 + k)^4] + [CI5 / (1 + k)^5] } - C0

NPV = { 14000/(1+0.15)1 + 8200/(1+0.15)2 + 12000/(1+0.15)3 + 15000/(1+0.15)4 +

22000/(1+0.15)5} – 30000

NPV = (12173.91 + 6200.37 + 7890.19 + 8576.29 + 10937.89 ) – 30000

NPV = 15778.67

Hence NPV = 15779

Now to calculate IRR, we use the below formula:

C0 ={[CI1 / (1 + r)^1] + [CI2 / (1 + r)^2] + [CI3 / (1 + r)^3]+ [CI3 / (1 + r)^3] + [CI4 / (1 + r)^4]+ [CI5 / (1
+ r)^5] }

30000 = 14000/(1 + r)1 + 8200/(1 + r)2 + 12000/(1 + r)3 + 15000/(1 + r)4 + 22000/(1 + r)5

By running this formula in excel, we come to know that IRR = 34% which means by investing 30000
initially, the project will generate 34% returns annually.
To summarize, we come to know that NPV = 15779 and IRR = 34%. As NPV is positive and IRR > k (@
15%), this project is worth considering and investing in.
Answer 2:

The cash cycle is the amount of time it takes for a company to convert its investments in inventory
and other resources into cash. It represents the time period between the company's cash outflows
for purchases of raw materials and other resources, and the cash inflows from the sale of finished
products. A shorter cash cycle is generally preferable, as it means the company is able to generate
cash more quickly.

To calculate the cash cycle, we need to determine the following time periods:

Inventory holding period: This is the average amount of time it takes for the company to sell its
inventory. It is calculated as follows:

Inventory holding period = (Opening inventory + Closing inventory) / 2 x 360 / Cost of goods sold

=(400000+500000+80000+80000+70000+250000+315000)/2X360/(1045000+850000)

=161 days

Accounts receivable period: This is the average amount of time it takes for the company to collect its
accounts receivable. It is calculated as follows:

Accounts receivable period = Accounts receivable / Total sales x 360

=3,15,000/4,20,00,500X360

=2.70 days
Accounts payable period: This is the average amount of time it takes for the company to pay its
accounts payable. It is calculated as follows:

Accounts payable period = Accounts payable / Total purchases x 360

=6,25,000/3,23,00,000X360

=6.97 days.

Now we can calculate the cash cycle as follows:

Cash cycle = Inventory holding period + Accounts receivable period - Accounts payable period

=161+2.70-6.97

= 156.73 days

Therefore, the company's cash cycle is 156.73 days. This means that on average, it takes the
company nearly five months to convert its investments in inventory and other resources into cash.
The company may consider ways to shorten its cash cycle, such as improving inventory
management, offering more favorable payment terms to customers, and negotiating better terms
with suppliers
Answer 3 a:

To calculate the Current Ratio and the Acid Test Ratio, we need to extract the relevant information
from the balance sheet provided.

Current Ratio = Current Assets / Current Liabilities

In the given balance sheet, the relevant values for the Current Ratio calculation are:

Current Assets:

- Trade receivables: ₹23,377.80 crores

- Cash and Bank Balances: ₹89.99 crores

- Short-term loans and advances: ₹12,402.75 crores

- Other current assets: ₹215.18 crores

Total Current Assets = ₹23,377.80 + ₹89.99 + ₹12,402.75 + ₹215.18 = ₹36,085.72 crores

Current Liabilities:

- Short-term borrowings: ₹8,430.79 crores

- Trade payables: ₹20,217.97 crores

- Other current liabilities: ₹3,025.84 crores

- Short-term provisions: ₹31,698.56 crores

Total Current Liabilities = ₹8,430.79 + ₹20,217.97 + ₹3,025.84 + ₹31,698.56 = ₹63,373.16 crores

Current Ratio = Total Current Assets / Total Current Liabilities

Current Ratio = ₹36,085.72 crores / ₹63,373.16 crores

Current Ratio ≈ 0.5694

Acid Test Ratio (or Quick Ratio) = (Current Assets - Inventories) / Current Liabilities

In the given balance sheet, the relevant values for the Acid Test Ratio calculation are:

Inventories: ₹23.96 crores

Acid Test Ratio = (Total Current Assets - Inventories) / Total Current Liabilities

Acid Test Ratio = (₹36,085.72 crores - ₹23.96 crores) / ₹63,373.16 crores

Acid Test Ratio ≈ 0.5662

Therefore, the Current Ratio is approximately 0.5694 and the Acid Test Ratio is approximately
0.5662.