2 (b)

Installed capacity
Production (Utilisation)
Sales Revenue
Variable Costs
Material Costs
Consumable Stores
Utilities
Wages
Repairs & maintenance
Interest on W/C.

Break Even point

in terms of installed capacity

50000
40000
22.56

S.P. per Unit

V.C. per unit
C.M. per Unit

10.45
1.76
1.82
0.46
0.24
0.16
14.89

Fixed Costs
Salaries
Rents & taxes
Insurance
Misc. Exp.
Admn. Exp.
Selling Exp.
Int. on term Loan
Depreciation

56.4
37.225
19.175

1.32
0.05
0.1
1.14
0.47
0.05
0.54
0.75
4.42

23050.85
46%

3
a) Equity
Pref.
Total Equity
Term loan
b) Project cash Flows
Investment in Fixed Assets
Net Working Capital
Profit After tax
Add: Depreciation
Add: Term Loan Interrest * (1-t)

3 Debt:Equity 17.5:6
3
2.9 : 1
6
17.5
0
-23.5
-2.96

1.43

-1.52

-0.13

-0.14

4.59
1.87
1.92
9.81

7.35
2.72
1.52
10.07

9.45
3.57
1.03
13.92

7.01
4.62
0.15
11.64

5.84
5.8
0.23
11.87

-26.46
IRR
31.23%
NPV
Since the rate of discounting has not been provided and no information is
available about expected dividends, preference dividends and term loan interest
WACC can not be found.

5 (b)
Option 1
Initial Borrowing
Interest rate
Interest Payment
PV Factor
PV
NPV

Option 2
Initial Borrowing
Interest rate
Interest Payment
PV Factor
PV
NPV

0.5

1.5

2.5

5000000
7.50%
7.50%
7.50%
7.50%
6.50%
6.50%
-187500 -187500 -187500 -187500 -162500 -162500
0.963855 0.929017 0.895438 0.863073 0.835906 0.809594
-180723 -174191 -167895 -161826 -135835 -131559
-952028

5000000
7.75%
7.25%
-193750 -181250
0.962696 0.929019
-186522 -168385

7.25%
7.25%
6.25%
6.25%
-181250 -181250 -156250 -156250
0.89652 0.865158 0.838941 0.813518
-162494 -156810 -131085 -127112

-932408

Since net interest outgoings of Option 2 are lower in present value terms, it is preferable
Option 1
Initial Borrowing
Interest rate
Interest Payment

5000000
0.00%
0
-971288

7.50%
-375000
0.963855
-361446

0.00%
0

7.50%
-375000
0.89661
-336229

0.00%
0

6.50%
-325000
0.841887
-273613

6 (b)
a Land & Site development

b Buildings & Civil Works

c Plant & machinery

d Miscl. Fixed Assets

e
f
g
h
i
j

Land
Legal exp. Etc.
Development
Main Bldgs
Utility, Admin etc,
Imported
Indigenous
Foundations
Office Eqp.
Vehicles
Fees

Technical Know How

Foreign Tech Expenses
Preliminary Expenses
Pre operative exp.
Salaries of team etc.
Margin for Working Capital Margin Money
Contingencies
Construction
Machinery & FA
Foreign Exchange

35
2.5
15 52.5
125
30
155
500
1200
100 1800
50
50
100
300
300
0
0
0
0
250
250
420
420
13.5
180
40 233.5
3311

Only proportionate cost taken

"

5 % of Blds, land dev. & Found.

10 % of machinery & other FA
5 % of Imp. Mach & Know How

7 (b)
Activity
A
B
C
D
E
F
G

Time
Predecessor Normal
Crash
4
6
2
A
5
C
2
A
5
B, D, E
4

Paths
P1
P2
P3
P4

A-F
A-D-G
C-E-G
B-G

Cost
Crash
60
150
30
150
100
115
100
705

Normal
3
4
1
3
2
3
1

Cost/day
90
30
250
50
60
30
250
50
100 N.A.
175
30
310
70

9/6
13 / 7
8/4
10 / 5

Path P 2 is Critical Path with Normal Duration of 13 days & Cost of Rs. 705
To crash project by 3 days the following activities will be crashed in order:
1) Activity A by one day costing Rs. 30 Extra
2) Activity D by 2 days costing Rs. 100 Extra (Rs. 50 per day X 2 days)
Total Extra cost = Rs. 130
Total project cost after crashing by 3 days = Rs. 705 + Rs. 130 = Rs 835
A