Question
As the manager of a financial services company, you have received a proposal seeking a term loan of $ 300 million, from a firm
As the manager of a financial services company, you have received a proposal seeking a term loan of $ 300 million, from a firm planning an investment in fixed assets of $ 500 million in a new project. The loan is indicated to be repayable in three annual instalments commencing from the end of the second year. The following information concerning the project is available: $ in millions) Year Particulars Gross profit (before depreciation) Depreciation Interest on term loan 1 2 3 4 25 45 Working capital borrowing (interest) Provision for tax 10 15 201 75 50 85551 100 150 45 34320 15 20 33528 150 Assuming other techno-economic criteria to be satisfactory, you are required to: (a) compute appropriate financial ratio which, in your opinion, would guide the (b) interpret briefly the ratio so computed and give your views on the proposal.
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