Need help with finding Operating cash flow for a year?

XYZ Gas Limited is into Oil & Gas Sector. It is planning to open another CNG outlet in Delhi. To identify a suitable location and to carry out a detailed feasibility study the company hired a consultant and paid a fees of Rs.5,00,000 towards the same.

Based upon the feasibility report the following details were identified:

MARKET ANALYSIS

The following demand estimates were made for the first year of operations

• CNG : 40,000 Kg per day

It is estimated that the CNG will generate a margin of Rs.1.25 per Kg. The demand is expected to grow by 10% per annum. The margins are expected to grow by 3% per annum.

COST OF THE Project

The land would be taken on a 10 years lease at an initial deposit of Rs.2 crores and a monthly rent of Rs.2 lakhs. The other costs are estimated as follows:

Leveling of plot, site preparation, construction etc.Rs.2 crores

Equipments cost and installationRs.3 Crores

Working Capital RequirementRs. 1 Crore.

It is estimated that the residual value of the plant and machinery would be just sufficient to meet the cost of removal. As per the lease agreement any building and structure would revert back to the Landlord. The funds blocked in the working capital would be recovered in full at the end of the project life.

MEANS OF FINANCE

The project would be financed 50% by internal resources and 50% by borrowed funds. The rate of interest on the borrowed funds is 10%. As per the internal policy of the company the required rate of return on equity is 14%.

OPERATING COST

• Variable Cost: 5% on margin
• Manpower cost : Rs.100,000 per month
• Maintenance :10% per annum of the cost of equipment
• Other Expenses:Rs.1,00,000 per month.

It is estimated that the expenses would increase by 5% every year.

Cost of site preparation and building would be depreciated at the rate of 20% per annum on the written down value basis. The rate of deprecation on Equipments would be @ 25% on the WDV basis.

The applicable tax rate for the company is 30%.

Need help with finding Operating cash flow for a year?

Thanks and regards,