CREDIT PROPOSAL ANALYSIS

Hydro Engineering Works (Pvt.) Ltd. (HEw) have recently been awarded a contract by WAPDA to procure, install and test run an auxiliary turbine at Tarbela Dam. This will lead to significant reduction in load shedding. Approved value of contract is PKR 700million. Knowing the provisions of the Contract Document, HEW requested East West Commercial Bank to provide APG for 20% of contract value for 1 year. Calculate the amount of APG to be issued by East West Commercial Bank. i) Write down book entries to be passed by East West Commercial Bank towards issuance of APG ii) Contractor is expected to raise 10 more bills of approx PKR 25 million each during 1 year. Since APG has been issued and work performed as per contract specifications, calculate net amount of bill that will be issued by beneficiary in favour of contractor. i Explain APG redemption process and prepare book entries to be passed by East West Commercial Bank in its books for reversal/redemption of APG.