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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 Working capital borrowing (interest) Provision for tax 201 75 50 25 10 285551 3 4: 100 150 150 45 40 35 45 30 15 20 20 10 30 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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