Project Appraisal

Subject encipher PPA1C Paper PROJECT APPRAISAL Specific Instructions ?Answer only the four questions. ?Marks dole out ampere-second. Each mind carries equal marks. ? contrive limit is 200 300words General Instructions ?The Student should submit this engagement in the handwritten form (not in the typed format) ? The Student should submit this fitting within the time contract by the exam dept ? Each Question mentioned in this assignment should be answered within the word limit specified ? The student should only use the Rule sheet papers for tell the questions. The student should attach this assignment paper with the answered papers. ?Failure to comply with the in a higher place Five instructions would lead to rejection of assignment. _____________________________________________________ Question No 1 A choice is to be made between two competing hurtles which requires an equal investment of Rs 50,000 and be evaluate to gene ramble net cash flow as under Project 1Project 2 can of grade 1Rs. 50,000Rs. 20,000 End of year 2Rs. 30,000Rs. 24,000 End of year 3Rs. 20,000Rs. 36,000 End of year 4NilRs. 50,000 End of year 5Rs. 24,000Rs. 16,000End of year 6Rs. 12,000Rs. 8,000 The address of capital of the company is 10% . The following atomic number 18 the Present Value Factors 10% per annum YearP. V . Factors 10% p. a 10. 909 20. 826 30. 751 40. 683 50. 621 60. 564 Which externalise proposal should be chosen and why? label the project proposals as under Discounted Cash Flow. Pay back period methods, pointing out their congress merits and demerits. Under what circumstances is the pay back period method and the NPV system used for evaluating projects. Question No 2 (A)What is the rationale for NPV Method? controvert the feature of NPV Method? (B) Teja international is determining the cash flow for a project involving transposition of an old machine by a juvenilefound machine. The old machine bought a few years ago has a book value of Rs 800,000 and it can be sold to realize a post tax economize value of rs 900000. It has a remaining biography of 5 years after which its net salvage value is expected to be Rs 200,000. it is being depreciated annually at a rate of 25% under the WDV method . The incremental working capital associated with this machine is 500,000. The new machine cost rupees 300,000 .It is expected to fetch a net salvage value of Rs 1. 500,000 after quintuple years . The depreciation rate applicable to it is 25% under the WDV method . The new machine is expected to take away a saving of Rs 650,000 annually in manufacturing costs(other than depreciation ). The tax rate applicable to the firm is 30% a)Estimate the cash flow associated with the replacement project. b)What is the NPV of the replacement project if the cost of capital is 14%. Question No 3 a)The management of Parmila Ltd. is considering an investment project costing Rs. ,50,000 and it will have a scrap value of Rs. 10,000 at the end of its 5 years l ife. loony toons charges and installation charges are expected to be Rs. 5,000 and Rs. 25,000 respectively. If the project is accepted, a make unnecessary part inventory of Rs. 10,000 must also be maintained. It is estimated that the spare separate will have an estimated scrap value of 60% of their initial cost after 5 years. Annual revenue from the project is expected to be Rs. 1,70,000 and annual labour, material and maintenance expenses are estimated to be Rs. 15,000, Rs. 0,000 and Rs. 5,000 respectively. The depreciation and taxes for five years will be YearDepreciationTax (Rs. )(Rs. ) 1 2 3 4 572,000 43,200 32,400 21,600 80011,200 22,720 27,040 31,360 39,680 Calculate the net cash flows for each year and cost of the project. Evaluate the project at 12% rate of interest. b)How gestation period of an on-going project affects Project financing decisions? Question No 4(A) The data concerning a come out development project at the end of the 10th week of carrying out is given be low ActivityProgress (%) t the end of 10th weekBudgeted Cost at Completion (BAC)Actual Cost of work performed (ACWP) PlannedActual(Rs. Lakhs)(Rs. Lakhs) A B C D E F G H I J K L100 50 100 100 50 100 70 100 200 2090 40 80 100 20 80 60 10 90 90 5 35 5 10 20 10 15 5 10 15 10 207 15 5 10 5 10 9 1 13 9 Total16084 The Project is scheduled to be completed at the end of the 20th week. Calculate the costs forecast at completion, assume that the remaining work shall progress . Question No 4 (B) a)S expressage has Rs. 10, 00,000 allocated for capital budgeting purposes.The following proposals and associated Profitability Index have been determined. ProjectAmount (Rs. )Profitability Index 1 2 3 4 5 6300,000 150,000 350,000 450,000 200,000 400,0001. 22 0. 95 1. 20 1. 18 1. 20 1. 05 Which of the above investment should be undertaken? Assume that the Projects are indivisible and there is no alternative use of the money allotted for capital budgeting. b)Project Cost Estimation is a vital facto r for starting signal the business. As a Financial Analyst, you are required to prepare the travel for cost estimation