Question 10:

BCD Corporation is evaluating a new business venture with a project life of 6 years. The initial cost of the project is ₹4 crores. An additional ₹25 lakhs is needed for working capital, recoverable at the end of the project. The project is expected to generate annual revenues as follows:

• Year 1: ₹1 crore
• Year 2: ₹1.5 crores
• Year 3: ₹2 crores
• Year 4: ₹2.2 crores
• Year 5: ₹2.5 crores
• Year 6: ₹2.8 crores

Operating costs, excluding depreciation, are 50% of revenues. The equipment's salvage value at the end of the project is ₹30 lakhs. The tax rate is 25%, and the company's discount rate is 11%.

Requirements:

1. Estimate the project's annual net cash flows.
2. Calculate the project's Net Present Value (NPV).
3. Determine the project's Internal Rate of Return (IRR).
4. Compute the Payback Period.
5. Conduct a scenario analysis with a 10% increase in operating costs.

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1. Analyze the following financial statement information and answer the questions below:

Item	Value ($ millions)
Cash	50
Accounts Receivable	75
Inventories	120
Total Current Assets	245
Total Assets	700
Accounts Payable	60
Short-Term Debt	40
Long-Term Debt	200
Total Liabilities	300
Equity	400

2. a. Calculate the current ratio. b. Determine the debt to equity ratio. c. What is the total debt to total assets ratio? d. If the company wants to increase its current ratio to 2.0, by how much should it increase its cash holdings?