AnandPriya Office Equipments Ltd is embarking upon a project to manufacture personal printers. Following Information and Assumptions are provided:

A$)$ Cost of the project $($Rs in Lakh$)$

$1)$ Land and Site Development $=41\mathrm{.}60$

$2)$ Other Fixed Assets$=383\mathrm{.}40$

$3)$ Preliminary expense$=25$

Capital cost$=450$

$4)$ Margin Money for Working Capital$=300$

Total$=750$

B$)$ Means of Finance$($Rs in Lakh$)$

$1)$ Promoters Equity Capital$($FV Rs $10)=500$

$2)$ Term Loan$=250$

Total$=750$

C$)$ Further Information

$1)$ Project has useful life for $5$ years after $1$ year of Gestation.

$2)$ The Installed Capacity of the project works out to be $100000$ Printers PA$.$ The expected Capacity utilization will be $75\%$ in the $1$st year,$85\%$ in the $2$nd year and $95\%$ in the third year and beyond.

$3)$ After Taking into account the inventory of stock in process and finished goods,the quantity to be sold works out as under:

First year$=68050$ printers

Second year$=84100$ printers

Third year$=94000$ printers

Fourth year onwards$=95000$ printers.

Closing and Opening Inventory will be the same in the $4$th year and afterwards.

$4)$ The sales Realization will be Rs $3650$ per printer

$5)$ The cost of Raw materials will be Rs$1825$ per printer.

$6)$ The cost of power will be Rs$55$ Lakhs at $75\%$ capacity utilization.

$7)$ Wages and factories salaries are expected to be Rs$103\mathrm{.}56$ Lakh for the first operating year. Therefore, they would rise at the rate of $10\%$ per year.

$8)$ Factory overhead expenses will be Rs$45\mathrm{.}65$ Lakh in the $1$st year.Thereafter, they would rise at the rate of $7\mathrm{.}50\%$ per year.

$9)$ Administrative expenses including salaries will be Rs$180$ Lakh for the $1$st year. An increase of $10\%$ is expected thereafter every year.

$10)$ Selling expenses will be $15\%$ of sales.

$11)$ SLM Depreciation as per company law will amount to Rs $28\mathrm{.}34$ Lakh PA

$12)$ Preliminary expenses of Rs$25$Lakh have to be written off over $5$ years manually.

$13)$ Term Loan carries interest rate of $12\%$ PA and is redeemable within $5$ years in annual installments at the year end.

$14)$ Interest on Term Loan will be Rs $30$ Lakh in the $1$st year, Rs $27$ Lakh in the $2$nd year, Rs $24$ Lakh in the $3$rd year, Rs $21$ Lakh in the $4$th year and Rs $18$ Lakh in the $5$th year.

$15)$ Bank Finance for Working capital also carries interest rate of $12\%.$

$16)$ Interest on Bank Finance for Working Capital works out to be Rs $36\mathrm{.}75$ Lakh in the $1$st year, Rs $42\mathrm{.}75$ in the $2$nd year, Rs $47\mathrm{.}25$ Lakh in the $3$rd year, Rs $47\mathrm{.}50$ Lakh in the $4$th year and Rs $47\mathrm{.}85$ Lakh in the $5$th year.

$17)$ Following is the build up of projected net current Assets and bank Finance for Working Capital

Net Current Assets Y$1,$Y$2,$Y$3,$Y$4$ and Y$5=606,661,703,704,710$

Working Capital Finance Y$1,$Y$2,$Y$3,$Y$4$ and Y$5=306,356,394,396,399$

$18)$ WDV Depreciation as per Income tax for the $1$st $5$ years will amount to Rs $84\mathrm{.}55$ Lakh, Rs $75\mathrm{.}41$ Lakh, Rs $67\mathrm{.}85$ Lakh, Rs $58\mathrm{.}90$ Lakh and Rs $51\mathrm{.}20$ Lakh respectively.

$19)$ Income tax has to be provided for @$30\%.$Ignore surcharge and MAT.

$20)$ Dividend has to provided for second year onwards @$16\%$ plus Dividend tax thereon @$20\%.$

Calculate

$1)$ Profitability estimate for $5$ operating years.

$2)$ Balance sheet for Gestation period and $5$ operating years.

$3)$ Cash flow statements for Gestation period and $5$ operating years.

Further Information is given below:$-$

$1)$ Salvage value of Fixed Assets, other than Land at the end of $5$ years to be taken @$5\%$ of the original cost.

$2)$ Salvage value of land to be taken as equivalent to its cost.

$3)$ Cost of equity capital to be taken @$15\%$ post tax.

$4)$ Recovery of Total deployment in net current Assets at the end of $5$th year to be taken at par.

$5)$ Bank borrowing for Working Capital to be repaid at the end of the $5$th year.

Based on the financial statements carry out its overall financial evaluation.

Calculate:$-$

$1)$ IRR$=?$

$2)$ DSCR$=?$

$3)$ Commercial BEP$=?$

$4)$ Cash BEP

Do you find the project acceptable?

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