Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 1

DATA ANALYSIS

TRADITIONAL METHODS:

PAYBACK PERIOD:

It is the most popular and widely recognized traditional method at evaluating the

investment proposals. It can defined as the “the number of years requires to recover the original

cash outlay invested in a project”.

Cash out lay

Payback period =

Annual cash inflows

EVAPERATORS

750

PBP = = 1.27

589.79

JUICE HEATERS

700

PBP = = 1.04

667.19

CANE UNLOADER TROLLEYL BRIDGE

730

PBP = = 1.17

621.46

CAN FEEDING TABLES

500

PBP = = 1.210

412.90

ROTATRY JUICE STRAINER

500

PBP = = 1.16

430.40

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 2

S.NO MACHINARY INVESTMENT PAY BACK

PERIOD

RANK

1 EVAPERATORS 750 1.27 I

2 JUICE HEATERS 700 1.04 V

3 CANEUNLOADER

TROLLEYL

BRIDGE

730 1.17 III

4 CAN FEEDING

TABLES

500 1.21 II

5 ROTATRY JUICE

STRANIESS

500 1.16 IV

INTERPRETATION:

Payback period method the ranks are given based on the value obtained the first

rank goes for lowest according to value and the next rank for highest value so on.

The first rank given to JUICE HEATERS the period is 1.04 and last rank to

EVAPERARORS period 1.27 years

AVERAGE RATE OF RETURN:

It is an accounting method, which uses the accounting information revealed the

financial statements to measure the profitability of an investment proposal. It can be determined

by dividing the average income after tax by the investment i.e. the average book value after

depreciation.

Avgnet income

ARR = * 100

Avg investment

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 3

EVAPERATORS

810

ARR = * 100

335.77

= 24.143

JUICE HEATERS

810+836.97

AVG NET INCOME = = 823.79

2

371.35+335

= = 539.20

2

823.79

= * 100

539.20

= 22.97

CANE UNLOADER TROLLEYL BRIDGE

810+836.97+805.02

= = 823.79

3

371.35+335+485.67

= = 539.20

3

1915.97

= * 100

1450

= 13.20

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 4

CANE FEEDING TBLES

810+836.97+805.02+811.01

=

4

371.35+335+485.67+775.84

=

4

815.67

= * 100

492.06

= 16.57

ROTATRY JUICE STRAINER

810+836.97+805.02+811.01+920.65

= = 836.85

5

371.35+335+485.67+775.84+1148.02

= = 2197.85

5

836.85

= * 100

2197.88

= 38.075

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 5

S.NO MACHINARY INVESTMENT ARR RANK

1 EVAPERATORS 750 24.3 II

2 JUICE HEATERS 700 22.7 III

3 CANEUNLOADER

TROLLEYL

BRIDGE

730 19.15 IV

4 CAN FEEDING

TABLES

500 16.5 V

5 ROTATRY JUICE

STRANIESS

500 38.0 I

INTERPRETATION:

According to ARR method the ranks are given based on the value obtained the first

rank goes for highest value and the next rank for lowest value so on. The first rank given to

ROTATRY JUICE STRANIESS the ARR is 30.00 last rank given to CANE FEEDING

TABLES the ARR is 16.50.

DISCOUNT CASH FLOW METHOD

NET PRESENT VALUE METHOD:

The net present value method is a classic economic method of evaluating the

investment proposals. It is one of the methods of discounted cash flow. It recognizes the

importance of time value of money. It correctly postulates that cash flows arising at different

time period different in values and are comparable only when their equivalent i.e. present value

are found out.

NPV = EPV- EC

EPV = Total present values of cash in flows

EC = Total present values of cash out flows

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 6

EVAPERATORS

NPV = 589.79 – 750

= 210.2

JUICE HEATERS

NPV = 667.10 – 700

= 32.90

CANE UNLOADER TROLLEYL BRIDGE

NPV = 621.31 – 730

= 108.6

CAN FEEDING TABLES

NPV = 412.90 – 500

= 87.10

ROTATRY JUICE STRANIESS

NPV = 430.4 – 500

= 69.60

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 7

S.NO MACHINARY INVESTMENT NPV VALUE RANK

1 EVAPERATORS 750 210.2 I

2 JUICE HEATERS 700 32.90 V

3 CANEUNLOADER

TROLLEYL

BRIDGE

730 108.6 II

4 CAN FEEDING

TABLES

500 87.10 III

5 ROTATRY JUICE

STRANIESS

500 69.60 IV

INTERPRETATION:

According to net present value method the ranks are given on the value obtained

the first rank goes for highest value and the next rank for lowest value so on. The first rank given

to EVAPERATORS the NPV is 210.2 and the last rank to is JUICE HEATERS is 32.90 NPV.

INTERNAL RATE OF RETURN:

Internal rate of return is also known as time adjusted return or discounted rate of

return. This method is based on the principle of present value this methods considers the relative

of magnitude and timing of cash flows. The use of this method for appraising the investment

projects was for the first time used by Joel dean.

A1 A2 An

C= + +

(1+r) (1+r) 2 (1+r) n

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 8

EVAPERATORS

589.79 589.79 589.79 589.79 589.79

= + + + +

(1+10) (1+10)2 (1+10)3 (1+10)4 (1+10)5

589.79 589.79 589.79 589.79 589.79

= + + + +

11 22 33 44 55

= 53.61 + 26.80 + 18.87 + 13.40 + 10.72

= 122.40

JUICE HEATERS

667.10 667.10 667.10 667.10 667.10

= + + + +

(1+10) (1+10)2 (1+10)3 (1+10)4 (1+10)5

667.10 667.10 667.10 667.10 667.10

= + + + +

11 22 33 44 55

= 60.41 + 30.32 + 20.1 + 15.16 + 12.15

= 138.480

CANUNLOADER TROLLEYL BRIDGE

621.51 621.51 621.51 621.51 621.51

= + + + +

(1+10) (1+10)2 (1+10)3 (1+10)4 (1+10)5

621.51 621.51 621.51 621.51 621.51

= + + + +

11 22 33 44 55

= 56.50 + 28.50 + 18.83 + 14.12 + 11.30 = 129.00

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 9

CAN FEEDING TABLES

412.90 412.90 412.90 412.90 412.90

= + + + +

(1+10) (1+10)2 (1+10)3 (1+10)4 (1+10)5

412.90 412.90 412.90 412.90 412.90

= + + + +

11 22 33 44 55

= 37.53 + 18.76 + 12.51 + 9.38 + 7.50

= 85.688

ROTATRY JUICE STRANIESS

430.04 430.04 430.04 430.04 430.04

= + + + +

(1+10) (1+10)2 (1+10)3 (1+10)4 (1+10)5

430.04 430.04 430.04 430.04 430.04

= + + + +

11 22 33 44 55

= 53.61 + 26.80 + 18.87 + 13.40 + 10.72

= 1628.10

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 10

S.NO MACHINARY INVESTMENT PV VALUE RANK

1 EVAPERATORS 589.79 22.40 III

2 JUICE HEATERS 667.10 38.40 I

3 CANEUNLOADER

TROLLEYL

BRIDGE

621.50 29.40 II

4 CAN FEEDING

TABLES

412.90 5.68 V

5 ROTATRY JUICE

STRANIESS

430.04 9.24 IV

INTERPRETATION:

According to internal rate of return method the ranks are given on the value obtained

the first rank goes for highest value and the next rank for lowest value so on. The first rank given

to JUICE HEATERS the IRR is 138.40 and last rank to CAN FEEDING TABLES the IRR

is 85.68.

PROFITABILITY INDEX:

The method is also known as “Benefit cost ratio “ according to van Horne, the

profitable index of a project is the ratio of present value of future net cash flows to the present

values of initial cash out flows.

Present values of cash in flows

PI =

Present values of initial cash out flows

EVAPERATORS

589.71

PI = = 0.78

750

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 11

JUICE HEATERS

667.10

PI = = 0.9530

700

CANEUNLOADER TROLLEYL BRIDGE

621.51

PI = = 0.8514

730

CAN FEEDING TABLES

412.90

PI = = 0.86

500

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 12

S.NO MACHINARY INVESTMENT PI RANK

1 EVAPERATORS 750 0.78 V

2 JUICE HEATERS 700 0.95 I

3 CANEUNLOADER

TROLLEYL

BRIDGE

730 0.85 III

4 CAN FEEDING

TABLES

500 0.82 IV

5 ROTATRY JUICE

STRANIESS

500 0.86 II

INTERPRETATION:

According to internal rate of return method the ranks are given on the value obtained

the first rank goes for highest value and the next rank for lowest value so on. The first rank given

to JUICE HEATERS the PI is 0.95 and last rank to EVAPERATORS is o.78 of profitability

index .

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 13

Balance Sheet in Rs. Lakhs

Particulars

Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015

12 months 12 months 12 months 12 months 12 months

Sources of funds

Total share capital 29.19 29.19 29.19 31.98 31.98

Equity share capital 29.19 29.19 29.19 31.98 31.98

Share application money 0.00 0.00 0.00 0.00 0.00

Preference share capital 0.00 0.00 0.00 0.00 0.00

Reserves 275.86 319.25 363.17 1009.73 981.05

Revaluation reserves 30.32 22.91 18.26 16.71 14.10

Net worth 335.37 371.35 410.62 1058.42 1027.13

Secured loans 220.76 249.11 330.92 249.48 232.82

Unsecured loans 35.57 78.03 136.77 186.19 368.14

Total debt 256.33 327.14 467.69 435.67 600.96

Total liabilities 591.70 698.49 878.31 1494.09 1628.09

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 14

Particulars

Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015

12 months 12 months 12 months 12 months 12 months

Application of funds

Gross block 497.29 536.40 542.58 558.22 578.55

Less: Accum, Depreciation 261.92 255.68 273.03 291.74 314.68

Net block 235.37 280.72 269.55 266.48 263.87

Capital working progress 15.63 5.22 17.49 4.94 24.84

investments 335.77 371.35 485.67 775.48 1148.08

Inventories 107.52 118.92 155.15 197.71 93.56

Sundry debtors 86.04 58.07 92.53 156.40 161.00

Cash and bank balance 26.41 69.10 104.45 158.32 103.68

Total current assets 199.97 181.05 252.97 357.22 256.98

Loans and advances 54.73 84.79 111.23 167.35 167.60

Fixed deposits 7.37 8.54 20.08 291.18 26.10

Total CA, loans & advances 262.07 274.38 384.28 815.75 450.68

Deferred credit 0.00 0.00 0.00 0.00 0.00

Current liabilities 208.93 203.26 228.26 293.72 185.28

Provisions 49.48 52.02 66.44 85.53 77.95

Total CL & provisions 258.41 255.3 294.70 379.25 263.23

Net current assets 3.66 19.02 89.58 436.50 187.45

Miscellaneous expenses 1.26 22.19 16.02 10.68 3.86

Total assets 591.69 698.50 878.31 1494.08 1628.10

Contingent liabilities 143.35 91.25 111.03 124.54 106.28

Book value(Rs) 62.71 71.63 13.44 32.58 31.68

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 15

Profit & Loss account: In Rs .Lakhs

Particulars

Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015

12 months 12 months 12 months 12 months 12 months

Income

Sales turnover 821.99 800.54 714.26 796.02 873.47

Excise duty 58.13 57.91 58.87 71.37 61.53

Net sales 763.86 742.63 655.39 724.65 811.94

Other income 37.98 82.38 120.85 91.76 131.25

Stock adjustments 8.82 11.96 28.78 -5.40 -22.54

Total income 810.66 836.97 805.02 811.01 920.65

Expenditure

Raw material 516.09 508.61 472.03 403.95 555.22

Power& fuel cost 35.70 41.65 49.63 58.69 68.20

Employee cost 68.72 67.35 62.66 79.58 82.93

Other manufacturing expenses 16.57 9.63 7.43 7.58 9.95

Selling and admin expenses 48.81 60.25 54.20 69.88 82.94

Miscellaneous expenses 16.56 21.79 22.01 25.03 25.93

Preoperative expenses

capitalized

-5.78 -5.38 -6.73 -7.49 -6.26

Total expenses 696.67 703.90 661.23 637.22 818.91

Capital Budgeting

VIJAYAM DEGREE AND PG COLLEGE Page 16

Particulars Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015

12 months 12 months 12 months 12 months 12 months

Operating profit 76.01 50.69 22.94 82.03 -29.51

PBDIT 113.99 133.07 143.79 173.79 101.74

Interest 17.45 24.31 39.02 38.28 58.51

PBDT 96.54 108.76 104.77 135.51 43.23

Depreciation 21.48 22.59 24.26 25.47 26.46

Other written off 0.00 0.00 0.00 0.00 0.00

Profit before tax 75.06 86.17 80.51 110.04 16.77

Extra-ordinary items 0.02 -0.08 -0.22 1.00 -1.51

PBT(post extra-ordinary items) 75.08 86.09 80.29 111.04 15.26

Tax -0.69 14.99 2.23 2.22 -2.83

Reported net profit 75.77 71.12 77.33 106.49 18.68

Total value addition 180.58 195.28 189.20 233.28 263.71

Preference dividend 0.00 0.00 0.00 0.00 0.00

Equity dividend 19.46 24.32 29.19 39.97 39.97

Corporate dividend tax 2.73 3.41 4.96 6.79 6.79

Pershare data(annualized)

Shares in issue 486.42 486.42 2918.52 3197.59 3197.59

Earning per share(Rs) 15.58 14.62 2.65 3.33 0.58

Equity dividend(%) 66.66 83.33 100.00 125.00 125.00

Book value(Rs) 62.71 71.63 13.44 32.58 31.68