capital budgeting naresh

8/12/2019 Capital Budgeting Naresh

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I. INTRODUCTION

The term Capital Budgeting refers to long term planning for proposed Capital outlays and

their financing. Thus it includes both rising of long term funds as well as their utilization.

It may this be defined as the firm's formal process for the acquisition and investment ofcapital. It is the decision making process by which the firm evaluates the purchase of

maor fi!ed assets.

It involves firm's decision to invest it current funds for addition" disposition" modification

and replacement of long#term or fi!ed assets. however" it should be noted that

investment in current assets necessitated on account of investment in a fi!ed assets is as

to be taken as a capital budgeting decision.

Capital Budgeting is a many#sided activity it includes searching for new and more

profitable investment proposals" Investigating " $ngineering and %arketing

considerations to predict the consequences of accepting the investment and making

economic analysis to determine the profit potential of each investment proposal. Its basic

feature can be summarized as follows.

It has the potentiality of making large anticipated profits.

It involves high degree of risk.

It involve a relatively long#time period between the initial outlay and the anticipated

return.

&n the basis of the above discussion it can be concluded that Capital Budgeting consists

in planning the development of available capital for the purpose of ma!imizing the long

term profitability.

Capital Budgeting is investment decision making as to whether a proect is worth

undertaking. Capital Budgeting is basically concerned with the ustification of capital

e!penditures. Current e!penditures are short#term and are completely written off in the

same year the e!penses occur.


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MEANING:

Capital Budging decision refers to assets that are in operations and yield a return over a

period of time" usually e!ceeding one year. It is a long term investment decision

involving huge capital e!penditures.

The main characteristics of a capital e!penditure are that the e!penditure is incurred at

one point of time where as benefits of the e!penditure are realized at different points of

time in future.

Capital Budgeting process involves planning" availability and controlling" allocation and

e!penditure of long term investment funds.

Cost of acquisition of permanent assets

THE FOLLOWING ARE SOME OF THE EXAMPLES OF CAPITAL

EXPENDITURE:

such as land and building plant and machinery" goodwill etc.

Cost of addition" e!pansion" improvement or alteration in the fi!ed assets.

Cost of replacement of permanent assets.

(esearch and development proect costs etc."

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DEFINITION:

Capital Budgeting is the long term planning for making and financing proposed capital

outlays

#Charles T.*orngreen

Capita Budgeting is concerned with planning and development of available capital for the

purpose of ma!imizing the long term profitability of the concern.

#+ynch

Capital Budgeting involves a current investment in which the benefits are e!pected to be

received beyond one year in the future,. It suggests that the investment in any asset

with a file of less than a year falls into realm of working capital management" whereas

ably asset with a like more than one year involves capital budgeting.

#-ames C.an *orne.

Capital Budgeting involves the entire process of planning e!penditures whose returns are

e!pected to e!tend beyond one year.

# /estone and Brigham

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1$$2 3&( T*$ 4T5267

Capital Budgeting are vital to an organization as they include the decisions as to7#

/hether funds should be invested in the long term proects such as setting of an Industry"

purchase of 8lant 9 %achinery etc.

To analyze the proposal for e!pansion or creating additional capacities.

To decide the replacement of permanent asset such as Building 9 $quipment.

To make financial analysis of various proposals regarding capital investment so as to

choose the best out of many alternative proposals.

*eavy investment in capital proects

+ong term implications for the firm

Irreversible decisions and

Complicated in the decision making.

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REVIEW OF LITERATURE

Capital budgeting is the planning process used to determine a firm;s e!penditure on

assets whose cash flows are e!pected to e!tend beyond one year such as machinery"

equipments investments etc .It is the process of analyzing and selecting investment

proects whose cash flows are e!pected to e!tend beyond one year such as research

and development of the proect

MEANING:

The process through which different proects are evaluated is known as capital

budgeting

Capital budgeting is defined


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IMPORTANCE OF CAPITAL BUDGETING

Capital budgeting offers effective control on cost of capital e!penditure proects.

It helps the management to avoid over investment and under The success and

failure of business mainly depends on how the available resources are being

utilized.

%ain tool of financial management

?ll types of capital budgeting decisions are e!posed to risk and uncertainty.

They are irreversible in nature.

Capital rationing gives sufficient scope for the financial manager to evaluate

different proposals and only viable proect must be taken up for investments.

STEPS IN CAPITAL BUDGETING PROCESS

Capital budgeting process involves the following

1. Project e!er"t#o!:Aenerating the proposals for investment is the first step.

The investment proposal may fall into one of the following categories7

8roposals to add new product to the product line"

8roposals to e!pand production capacity in e!isting lines

It is proposals to reduce the costs of the output of the e!isting products without altering

the scale of operation.

4ales campaigning" trade fairs people in the industry" ( and 2 institutes" conferences

and seminars will offer wide variety of innovations on capital assets for investment.

$. Project E%"&'"t#o!:it involves two steps

$stimation of benefits and costs7 the benefits and costs are measured in terms of cash

flows. The estimation of the cash inflows and cash outflows mainly depends on future


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uncertainties. The risk associated with each proect must be carefully analyzed and

sufficient provision must be made for covering the different types of risks.

4election of appropriate criteria to udge the desirability of the proect7 It must be

consistent with the firm;s obective of ma!imizing its market value. The technique of

time value of money may come as a handy tool in evaluation such proposals.

(. Project Se&ect#o!: 1o standard administrative procedure can be laid down for

approving the investment proposal. The screening and selection procedures are different

from firm to firm.

). Project E%"&'"t#o!:&nce the proposal for capital e!penditure is finalized" it is the

duty of the finance manager to e!plore the different alternatives available for acquiring

the funds. *e has to prepare capital budget. 4ufficient care must be taken to reduce the

average cost of funds. *e has to prepare periodical reports and must seek prior

permission from the top management. 4ystematic procedure should be developed to

review the performance of proects during their lifetime and after completion.

The follow up" comparison of actual performance with original estimates not only

ensures better forecasting but also helps in sharpening the techniques for improving

future forecasts.

F"ctor* #!+&'e!c#! c",#t"& -'et#!

?vailability of funds

4tructure of capital

Ta!ation policy

Aovernment policy

+ending policies of financial institutions

Immediate need of the proect


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$arnings

Capital return

$conomical value of the proect

/orking capital

T/e c&"**#+#c"t#o! o+ #!%e*t0e!t ,roject*

aD By proect size

4mall proects may be approved by departmental managers. %ore careful analysis

and Board of 2irectors' approval is needed for large proects of" say" half a million

dollars or more.

bD By type of benefit to the firm

?n increase in cash flow a decrease in risk an indirect benefit Eshowers for workers"

etcD.

cD By degree of dependence

%utually e!clusive proects Ecan e!ecute proect ? or B" but not bothD

complementary proects7 taking proect ? increases the cash flow of

proect substitute proects7 taking proect ? decreases the cash flow of proect B.

dD By degree of statistical dependence

8ositive dependence"

1egative dependence"

4tatistical independence.

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T/e eco!o0#c e%"&'"t#o! o+ #!%e*t0e!t ,ro,o*"&*

The analysis stipulates a decision rule for7

ID ?cceptingIID (eecting investment proects

THE TIME VALUE OF MONE

(ecall that the interaction of lenders with borrowers sets an equilibrium rate of interest.

Borrowing is only worthwhile if the return on the loan e!ceeds the cost of the borrowed

funds. +ending is only worthwhile if the return is at least equal to that which can be

obtained from alternative opportunities in the same risk class.

The interest rate received by the lender is made up of7

i. The time value of money7 the receipt of money is preferred sooner rather than

later. %oney can be used to earn more money. The earlier the money is received"

the greater the potential for increasing wealth. Thus" to forego the use of money"

you must get some compensation.

ii. The risk of the capital sum not being repaid. This uncertainty requires a premiumas a hedge against the risk" hence the return must be commensurate with the risk

being undertaken.

iii. Inflation7 money may lose its purchasing power over time. The lender must be

compensated for the declining spending G purchasing power of money. If the

lender receives no compensation" heGshe will be worse off when the loan is repaid

than at the time of lending the money.

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aD F't're %"&'e*2co0,o'! #!tere*t

3uture value E3D is the value in dollars at some point in the future of one or more

investments.

FVconsists of7

iDThe original sum of money invested or

iiD The return in the form of interest.

The general formula for computing 3uture alue is as follows7

FVn Vo(l + rDn

/here o is the initial sum invested is the interest rate is the number of periods for which

the investment is to receive interest.

Thus we can compute the future value of what owill accumulate to in n years when it is

compounded annually at the same rate of r by using the above formula.

PV 3nG(l + rDn

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OB3ECTIVES OF THE STUD:

To understand the need of organization" to identify and in high quality capital proects.

To analyze the e!pansion of business by increasing production and quality by acquiring

more fi!ed assets and the up to date machinery.

To evaluate the financial investments associated with the replacement of e!isting assets

soar the purchase of new assets.

Budget serve has a ''Blue print'' of the desired plan of action.

Budget helps in reduction of wastage and losses by revealing them in time for corrective

action.

Budget serves as the benchmark for the controlling on going operation.

Budgeting facilitate centralized control with delegated authority and respectability.

SCOPE OF THE STUD

The study is confined to *$(IT?A$ 3&&24 I12I? +I%IT$2 and analysis of

its financial statements.

The main aim of the study is to assess the proper management of current assets

9current liabilities.

The study concentrates more on the capital budgeting of the


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LIMITATIONS OF THE STUD

The period of the study is limited.

3inancial matters are sensitive in nature" the same could not acquire easily.

It may be due to restrictions imposed by management.

The sources of data are based on cash flows.

The study was conducted with the data available and analysis was made

accordingly.

2ue to the confidential matters of financial records" the data is not e!posed so the

study may not be detailed and full fledged.

4ince the study is based on the financial data that are obtained from the

company's financial statements" the limitations of financial statements shall be

equally applicable.

2ata is collected for five proects which is limited.

The study is confined to secondary data source and figures are taken from reports

and suggestions of various accountants.

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RESEARCH METHODOLOG

(esearch methodology implies a systematic attempt by the researcher to obtain

knowledge about subect understudy. This is systematic way to show the problem and it is

important components of the study without which a research may not able obtain the facts

and figures from employees.

The primary data needed for the proect analysis has been collected through unstructured

interviews and discussions conducted with the finance department. The secondary

sources of data are annual reports" brochures" news papers and web sources

DATA BASE

This study will be based on both primary and secondary data.

PRIMAR DATA

The data is collected directly from the organization people. It is an important data related

to financial aspects of the company.

It is in the form of questionnaires" interviews and discussions with employees.

PRIMAR DATA

Interaction with the planning and development department employees.

Interaction with finance employees.

SECONDAR DATA

2ata which are not originally collected but rather obtained published or unpublished

sources are known as secondary data.

5npublished sources like magazines past research" reports company manuals and its

reports for the year

The collected data is presented in table format. Investment decisions play a dominant role

in setting the fame work for managerial decisions.

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SECONDAR DATA

Capital budgeting manual of *?$(IT?A$

?ccounting manuals of *?$(IT?A$

Broachers

*ouse magazines of unit

1ews of papers

SIGNIFICANCE OF CAPITAL BUDGETING:

The need of capital budgeting can be emphasised taking into consideration the very

nature of the capital e!penditure such as heavy investment in capital proects" long#term

implications for the firm" irreversible decisions and complicates of the decision making.

Its importance can be illustrated well on the following other grounds7#

D I!#rect Forec"*t o+ S"&e*. The investment in fi!ed assets is related to future

sales of the firm during the life time of the assets purchased. It shows the

possibility of e!panding the production facilities to cover additional sales shown

in the sales budget. ?ny failure to make the sales forecast accurately would result

in over investment or under investment in fi!ed assets and any erroneous forecast

of asset needs may lead the firm to serious economic results.

)D Co0,"r"t#%e St'4 o+ A&ter!"t#%e Project* Capital budgeting makes a

comparative study of the alternative proects for the replacement of assets which

are wearing out or are in danger of becoming obsolete so as to make the best

possible investment in the replacement of assets. 3or this purpose" the profitability

of each proect is estimated.

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0D T#0#! o+ A**et*5Ac6'#*#t#o!. 8roper capital budgeting leads to proper timing of

assets#acquisition and improvement in quality of assets purchased. It is due to ht

nature of demand and supply of capital goods. The demand of capital goods does

not arise until sales impinge on productive capacity and such situation occurs only

intermittently. &n the other hand" supply of capital goods with their availability is

one of the functions of capital budgeting.

:D C"*/ Forec"*t. Capital investment requires substantial funds which can only be

arranged by making determined efforts to ensure their availability at the right

time. Thus it facilitates cash forecast.

@D Wort/5M"7#0#8"t#o! o+ S/"re/o&er*. The impact of long#term capital

investment decisions is far reaching. It protects the interests of the shareholders

and of the enterprise because it avoids over#investment and under#investment in

fi!ed assets. By selecting the most profitable proects" the management facilitates

the wealth ma!imization of equity share#holders.

D Ot/er F"ctor*. The following other factors can also be considered for its

significance7

aD It assists in formulating a sound depreciation and assets replacement policy.

bD It may be useful n considering methods of coast reduction. ? reduction campaign

may necessitate the consideration of purchasing most up#toKdate and modern

equipment.

cD The feasibility of replacing manual work by machinery may be seen from the

capital forecast be comparing the manual cost an the capital cost.

dD The capital cost of improving working conditions or safety can be obtained

through capital e!penditure forecasting.

eD It facilitates the management in making of the long#term plans an assists in the

formulation of general policy.

fD It studies the impact of capital investment on the revenue e!penditure of the firm

such as depreciation" insure and there fi!ed assets.

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The question arises why capital budgeting decisions are criticalL The foremost

importance is that the capital is a limited resource which is true of any form of capital"

whether it is raised through debt or equity. The firms always face the constraint of capital

rationing. This may result in the selection of less profitable investment proposals if the

budget allocation and utilization is the primary consideration. 4o the management should

make a careful decision whether a particular proect is economically acceptable and

within the specified limits of the investments to be made during a specified period of

time. In the case of more than one proect" management must identify the combination of

investment proects that will contribute to the value of the firm and profitability. This" in

essence" is the basis of capital budgeting.

Fo&&o9#! "re t/e c",#t"& -'et#! tec/!#6'e*:

A. Tr"#t#o!"& 0et/o*

D 8ayback period

)D ?ccounting rate of return method

B. D#*co'!te c"*/ +&o9 0et/o*

D 1et present value method

)D 8rofitability inde! method

0D Internal rate of return

PA BAC PERIOD METHOD

It refers to the period in which the proect will generate the necessary cash to recover the

initial investment.

It does not take the effect of time value of money.

It emphasizes more on annual cash inflows" economic life of the proect and original

investment.

The selection of the proect is based on the earning capacity of a proect.


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It involves simple calculation" selection or reection of the proect can be made easily"

results obtained are more reliable" best method for evaluating high risk proects.

PA BAC PERIOD ; BASED PERIOD < INVESTMENT = CCFAT

555555555555555555555555555555555

NEXT CCFAT

ACCOUNTING RATE OF RETURN METHOD

IT considers the earnings of the proect of the economic life. This method is based on

conventional accounting concepts. The rate of return is e!pressed as percentage of the

earnings of the investment in a particular proect. This method has been introduced toovercome the disadvantage of pay back period. The profit under this method is

calculated as profit after depreciation and ta! of the entire life of the proect.

This method of ?(( is not commonly accepted in assessing the profitability of capital

e!penditure. Because the method does to consider the heavy cash inflow during the

proect period as the earnings with be averaged. The cash flow advantage derived by

adopting different kinds of depreciation is also not considered in this method.

The annual rate of return uses accrual#based net income to calculate a proect's e!pected

profitability. The annual rate of return is compared to the company's required rate of return.

If the annual rate of return is greater than the required rate of return" the proect may be

accepted. The higher the rate of return" the higher the proect would be ranked.

The annual rate of return is a percentage calculated by dividing the e!pected annual net

income by the average investment. ?verage investment is usually calculated by adding the

beginning and ending proect book values and dividing by two

Acce,t or Reject Cr#ter#o!7


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5nder the method" all proect" having ?ccounting (ate of return higher than the

minimum rate establishment by management will be considered and those having ?((

less than the pre#determined rate.

This method ranks a 8roect as number one" if it has highest ?((" and lowest rank is

assigned to the proect with the lowest ?((.

RETURN ON INVESTMENT ; AVERAGE CASH INFLOW

5555555555555555555555555555555555 > 1??

AVERAGE INVESTMENT

DISCOUNTED CASH FLOW METHOD

Time adusted technique is an improvement over pay back method and ?((. ?n

investment is essentially out flow of funds aiming at fair percentage of return in future.

The presence of time as a factor in investment is fundamental for the purpose of

evaluating investment. Time is a crucial factor" because" the real value of money

fluctuates over a period of time. ? rupee received today has more value than a rupee

received tomorrow. In evaluating investment proects it is important to consider the

timing of returns on investment. 2iscounted cash flow technique takes into account both

the interest factor and the return after the payback period.

2iscounted cash flow technique involves the following steps7

Calculation of cash inflow and out flows over the entire life of the asset.

2iscounting the cash flows by a discount factor

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?ggregating the discounted cash inflows and comparing the total so obtained

with the discounted out flows.

NET PRESENT VALUE METHOD

It recognizes the impact of time value of money. It is considered as the best method of

evaluating the capital investment proposal.

Considering the time value of money is important when evaluating proects with different

costs" different cash flows" and different service lives. 2iscounted cash flow techniques"

such as the net present value method" consider the timing and amount of cash flows. To

use the net present value method" you will need to know the cash inflows" the cash

outflows" and the company's required rate of return on its investments. The required rate

of return becomes the discount rate used in the net present value calculation. 3or the

following e!amples" it is assumed that cash flows are received at the end of the period.

The 1et 8resent alue technique involves discounting net cash flows for a proect" then

subtracting net investment from the discounted net cash flows. The result is called the 1et

8resent alueE18D. If the net present value is positive" adopting the proect would add

to the value of the company. /hether the company chooses to do that will depend on

their selection strategies. If they pick all proects that add to the value of the company

they would choose all proects with positive net present values" even if that value is ust

M. &n the other hand" if they have limited resources" they will rank the proects and pick

those with the highest 18's.

Acce,t or Reject Cr#ter#":

. 3or a single proect" take it if and only if its 18 is positive.

). 3or many independentproects" take all those with positive 18.

0. 3or mutually e!clusiveproects" take the one with positive and highest 18.

It is widely used in practice. The cash inflow to be received at different period of time

will be discounted at a particular discount rate. The present values of the cash inflow are

compared with the original investment. The difference between the two will be used for

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accept or reect criteria. If the different yields END positive value" the proposal is selected

for investment. If the difference shows E#D negative values" it will be reected.

NPV;@ CF!2&


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IRR ; LOWER RATE < I!+&o9* "t &o9er r"te5 #!%e*t0e!t 55555555555555555555555555555555555555555555555555555

I!+&o9* "t &o9er r"te = #!+&o9 "t /#/er r"te

PROFITABILIT INDEX

The payback measures the length of time it takes a company to recover in cash its initial

investment. This concept can also be e!plained as the length of time it takes the proect to

generate cash equal to the investment and pay the company back. It is calculated by

dividing the capital investment by the net annual cash flow. If the net annual cash flow is

not e!pected to be the same" the average of the net annual cash flows may be used.

PROFITABILIT INDEX ;CF!2Co

C3n TotalCash flows

CoInitial investment

ACCEPT OR RE3ECT CRITE

3or independent proects7 ?ccept all proects with 8I greater than one Ethis is

identical to the 18 ruleD 3or mutually e!clusive proects7 ?mong the proects with 8I greater than one"

accept the one with the highest 8I.

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II. COMPAN PROFILE

Her#t"e "t " G&"!ce:

The *eritage Aroup" founded in HH) by 4ri 1ara Chandra Babu 1aidu" is

one of the fastest growing 8rivate 4ector $nterprises in India" with three#business

divisions viz." 2airy" (etail and ?gri under its flagship Company *eritage 3oods EIndiaD

+imited E*3I+D" one infrastructure subsidiary # *eritage Infra 2evelopers +imited and

other associate Companies viz." *eritage 3inlease +imited" *eritage International

+imited and *eritage ?gro %erine 8rivate +imited. The annual turnover of *eritage

3oods crossed (s.0: crores in )JJ#J and is aiming for (s.JJ crores during )JJ#JF.

8resently *eritage;s milk products have market presence in ?ndhra

8radesh" Oarnataka" Oerala" Tamil 1adu and %aharashtra and its retail stores across

Bangalore" Chennai and *yderabad. Integrated agri operations are in Chittoor and %edak

2istricts and these are backbone to retail operations.

In the year HH:" *3I+ went to 8ublic Issue to raise resources" which was

oversubscribed @: times and its shares are listed under B Category on B4$ E4tock Code7

@H@@)D and 14$ E4tock Code7 *$(ITA3&&2D

?bout the founder7

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4ri Chandra Babu 1aidu is one of the greatest 2ynamic" 8ragmatic"

8rogressive and isionary +eaders of the ) stCentury. /ith an obective of bringing

prosperity in to the rural families through co#operative efforts" he along with his relatives"

friends and associates promoted *eritage 3oods in the year HH) taking opportunity from

the Industrial 8olicy" HH of the Aovernment of India and he has been successful in his

endeavour.

?t present" *eritage has market presence in all the states of 4outh India.

%ore than three thousand villages and five lakh farmers are being benefited in these

states. &n the other side" *eritage is serving more than lakh customers needs"

employing more than JJ employees and generating indirectly employment opportunity

to more than @JJJ people. Beginning with a humble annual turnover of ust (s.:.0F

crores in HH0#H:" the sales turnover has reached close to (s.0JJ crores during the

financial year )JJ@#)JJ.

4ri 1aidu held various coveted and honorable positions including Chief

%inister of ?ndhra 8radesh" %inister for 3inance 9 (evenue" %inister for ?rchives 9

Cinematography" %ember of the ?.8. +egislative ?ssembly" 2irector of ?.8. 4mall

Industries 2evelopment Corporation" and Chairman of Oarshaka 8arishad.

4ri 1aidu has won numerous awards including P %ember of the /orld

$conomic 3orum's 2ream CabinetP ETime ?sia D" P4outh ?sian of the 6ear P ETime

?sia D" P Business 8erson of the 6ear P E$conomic TimesD" and P IT Indian of the

%illennium P E India TodayD.

4ri 1aidu was chosen as one of @J leaders at the forefront of change in the

year )JJJ by the Business /eek magazine for being an unflinching proponent of

technology and for his drive to transform the 4tate of ?ndhra 8radesh .

For9"r &oo#! *t"te0e!t*:

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4hift from risky agriculture to dairy farming

*eritage

3inancial support for purchase of cattleR insuring cattle

$stablishment of Cattle *ealth Care Centers

4upplying high quality Cattle feed

&rganizing P(ythu 4adasuP and ideo programmes for educating the farmers in

dairy farming

C'*to0er*:

Timely 4upply of Quality 9 *ealthy 8roducts

4upply high quality milk and milk products at affordable prices

3ocused on 1utritional 3oods

%ore than : lakh happy customers

*igh customer satisfaction

): hours help lines E SJ complaints a dayD

E0,&o4ee*:

$nhancing the Technical and %anagerial skills of $mployees through continuoustraining and development

Best appraisal systems to motivate employees

Incentive" bonus and reward systems to encourage employees

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*eritage forges ahead with a motto Padd value to everything you doP

Ret'r!*:

Consistent 2ividend 8ayment since 8ublic Issue E-anuary HH@D

Ser%#ce:

*ighest impotence to investor serviceR no notice from any regulatory authority

since )JJ in respect of investor service

ery transparent disclosures

S',,er*:

Doe/&"r: technical collaboration in %ilk drinks" yogurts drinks and fruit

flavoured drinks ?lfa#+aval7 supplier of high#end machinery and technical support

3ocusing on Tetra pack association for products package.

Soc#et4:

8otential $mployment Aeneration

more than 0@JJ employees are working with heritage

more than H@JJ procurement agents got self employment in rural areas

more than @JJJ sales agents associated with the company

$mployment for the youth by providing financial and animal husbandry support

for establishing %I1I 2?I(I$4

8roducing highly health conscious products for the society

'"t#e* o+ 0"!"e0e!t ,r#!c#,&e*:

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. Customer focus to understand and meet the changing needs and e!pectations of

customers.

). 8eople involvement to promote team work and tap the potential of people.

0. +eadership to set constancy of purpose and promote quality culture trough out the

organization.

:. 8rocess approach to assess the efficiency and effectiveness of each process.

@. 4ystems approach to understand the sequence and interaction of process.

. 3actual approach to decision making to ensure its accuracy.

. Continual improvement processes for improved business results.

F. 2evelopment of suppliers to get right product and services in right time at right

place.

Pro'ct2M"ret 9#*e ,er+or0"!ce:

The total turnover is (s 0: Crores during the financial year )JJ#J

against the turnover of )H).J) Crores in )JJ@#J. Today *eritage distributes quality milk

9 milk products in the states of ?.8" Oarnataka" Oerala 9 Tamil nadu.

2uring the year )JJ#J liquid milk sales was (s.)F0)H.H lakhs against

(s.):@)@.)0 lakhs in the previous year. The sales of miik products including bulk sales of

cream" ghee and butter were recorded (s @F.@H lakhs against (s :.) lakhs.

M#& *"&e*:

)0 growth was recorded in ?8 ).0F lakhs litres per dayE++82D in )JJ#J

against .H0 ++82 in )JJ@#J. 0 growth was recorded in Tamilnadu#.@0 ++82 in

)JJ#J against .0@ ++82 in )JJ@#J. &ver all growth of was recorded# @.:H ++82

)F


29/60

in )JJ#J against @. ++82. 3lavoured milk sales recorded a growth rate of over

)JJ@#J. Butter milk sales have gone up by :@ over )JJ@#J.

O't&oo:

Considering the growth potential in the liquid milk market" the company

has drawn plans to increase its market share in the e!isting markets and to enter into new

markets there by doubling revenues in dairy business in the ne!t 0 years. To achieve this

obect" company is undertaking maor e!pansion in dairy business by inverting over (s)J

crores during )JJ#J and over (sJ crores during the current year to strengthen the milk

procurement.

BRANCHES OF HFIL:

*3I+ has 0 wings. They are

. 2airy

). (etail

0. ?gribusiness

1. D"#r4:

It is the maor wing among all. The dairy products manufactured by *3I+ are

%ilk" curd" butter" ghee" flavoured milk" paneer" doodhpeda" ice cream.

)H


30/60

$. Ret"#&:

In the retail sector *3I+ has outlets namely


31/60

In this business *3I+ employees will go to farmers and have a deal with

them. Those farmers will sell their goods like vegetables" pulses to *3I+ only. ?nd *3I+

will transport the goods to retail outlets.

The agricultural professors will e!amine which area is suitable to import

vegetables from and also e!amine the vegetables" pulses and fruits in the lab. ?nd finally

they report to the *ead#?gribusiness. (epresentatives as per the instructions given by the

agri professors will approach the farmers directly and make a deal with them. It is the

process of registering the farmers.

). INDUSTR PROFILE

India is the world's second largest producer of food ne!t to China" and has the potential of

being the biggest with the food and agricultural sector. The total food production in India is

likely to double in the ne!t ten years and there is an opportunity for large investments in

food and food processing technologies" skills and equipment" especially in areas of Canning"

2airy and 3ood 8rocessing" 4pecialty 8rocessing" 8ackaging" 3rozen 3oodG(efrigeration

and Thermo 8rocessing. 3ruits 9 egetables" 3isheries" %ilk 9 %ilk 8roducts" %eat 9

8oultry" 8ackagedGConvenience 3oods.India is one of the worlds maor food producers but accounts for less than .@ per cent of

international food trade. This indicates vast scope for both investors and e!porters. 3ood

e!ports in HHF stood at 54 [email protected] billion whereas the world total was 54 M:0F billion. The

Indian food industries sales turnover is (s :J"JJJ crore E crore J millionD annually as

at the start of year )JJJ.

India's food processing sector covers fruit and vegetablesR meat and poultryR milk and milk

products" alcoholic beverages" fisheries" plantation" grain processing and other consumer

product groups like confectionery" chocolates and cocoa products" 4oya#based products"

mineral water" high protein foods etc. /e cover an e!haustive database of an array of

suppliers" manufacturers" e!porters and importers widely dealing in sectors like the #3ood

Industry.

The most promising sub#sectors includes #4oft#drink bottling" Confectionery manufacture"

0


32/60

3ishing" aquaculture" Arain#milling and grain#based products" %eat and poultry processing"

?lcoholic beverages" %ilk processing" Tomato paste" 3ast#food" (eady#to#eat breakfast

cereals" 3ood additives" flavors etc.

The food industry is the comple!" global collective of diverse businessesthat together

supply much of the food energy consumed by the world population. &nly subsistence

farmers" those who survive on what they grow" can be considered outside of the scope of

the modern food industry.

The food industry includes7

(egulation7 local" regional" national and international rules and regulations for

food production and sale" including U food quality and food safety" and industry

lobbying activities $ducation7 academic" vocational" consultancy

(esearch and development7 food technology

3inancial services" credit %anufacturing7 agrichemicals" seed" farm machinery

and supplies" agricultural construction" etc.

?griculture7 raising of crops and livestock" seafood 3ood processing7

preparation of fresh products for market" manufacture of prepared food products

%arketing7 promotion of generic products Ee.g. milk boardD" new products" publicopinion" through advertising" packaging" public relations " etc

/holesaleanddistribution7 warehousing" transportation" logistics

(etail7 supermarket chains and independent food stores" direct#to#consumer"

restaurant " food services

Consumer7 $nd user has one of the highest influences on the food industry

through things like preference

0)


33/60

The $conomic (esearch 4ervice of the 542? uses the term food system to describe the

same thing7

PThe 5.4. food system is a comple! network of farmers and the industries that link tothem. Those links include makers of farm equipment and chemicals as well as firms

that provide services to agribusinesses" such as providers of transportation and

financial services. The system also includes the food marketing industries that link

farms to consumers" and which include food and fiber processors" wholesalers"

retailers" and foodservice establishments.P

H#*tor4

3ood processing dates back to the prehistoric ages when crude processing incorporated

slaughtering" fermenting" sun drying" preserving withsalt" and various types of cooking

Esuch as roasting" smoking" steaming" and oven bakingD. 4alt#preservation was especially

common for foods that constituted warrior and sailors' diets" up until the introduction of

canning methods. $vidence for the e!istence of these methods e!ists in the writings of

the ancient Areek " Chaldean" $gyptian and (omancivilizations as well as archaeological

evidence from $urope" 1orth and 4outh ?merica and ?sia. These tried and tested

processing techniques remained essentially the same until the advent of the industrial

revolution. $!amples of ready#meals also e!ist from pre industrial revolution times such

as the Cornish pasty and the *aggis %odern food processing technology in the Hth and

)Jth century was largely developed to serve military needs. In FJH1icolas ?ppert

invented a vacuumbottling technique that would supply food for 3rench troops" and this

contributed to the development of tinning and then canning by 8eter 2urand in FJ.

?lthough initially e!pensive and somewhat hazardous due to the lead used in cans"

canned goods would later become a staple around the world 8asteurization. discovered by

+ouis 8asturing F)" was a significant advance in ensuring the micro#biological safety

of food.

In the )Jth century" /orld /ar II" the space race and the rising consumer society

in developed countries Eincluding the 5nited 4tatesD contributed to the growth of food

00


34/60


35/60

share in global food trade from .@ per cent to 0 per cent. This would require an

investment of 54M )J. billion.

?ccording to an $rnst and 6oung E$96D presentation" the food processing industry in

India will grow 0J#:J per cent as against the present @ per cent in the ne!t J#years.

8rime %inister 2r %anmohan 4ingh on &ctober " )JJH laid out a blueprint for rapid

growth in the country;s food processing sector. The 8rime %inister said that this can be

achieved by simplifying the ta! structure" formulating a 1ational 3ood 8rocessing 8olicy

and improving rural infrastructure.

%oreover" according to 5nion %inister for 3ood 8rocessing Industries" 4ubodh Oant

4ahai the central government is envisaging an investment of 54M ).@J billion in the

food processing industry over the ne!t five years" a maor chunk of which it plans to

attract from the private sector and financial institutions.

III. DATA ANALSIS AND INTERPRETATION

0@


36/60

T?B+$ 1&.0.J

PRO3ECT PRO3ECT

1

PRO3ECT

$

PRO3ECT

(

PRO3ECT

)

PRO3ECT

COST OF

INVESTMENT @)@ J)@J :)@ F)@ H)J

EAR2

PBDT

1 $ ( ) 1? TOT

AL

8(&-$C

T

J)

J

@)J @)

J

)

J

)

J

@)

J

@

J

@)

J

)

J

0

J

:J

8(&-$C

T )

0J

J

:@J :@

J

:F

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@

J

:@

J

:H@

J

:@

J

00

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0H0

J

:0F0J

8(&-$C

T 0

0J :@ :@ :F @ :@ :H@ :@ 00 0H0 :0F0

8(&-$C

T :

)

)

)

)

F

)

FH

)

)

F

@

)

00

::

J

8(&-$C

T :

H.F 0.F 0.

F

:@.

F

@:.

F

0.

F

:F.

@

0.

F

JF.

H

.

H

0:.

H

INTERPRITATION:

2epreciation as per the profit and loss account @ 4+%

2epreciation as per the income ta! act 0@ @ w.d.v

6ear 6ear ) onwards

Ta! rate 00

8resent value factor 0

Calculate 18"I(("8I"(&I.8B8

8(&-$CT 7 E$4TI%?T$ B52A$T (4 @)@ +?O*4D

0


37/60

6$?( 8B2T +$44

2$8($

CI?TI&1

?4 8$(

T?V

8BT +$44

T?V

00

8?T ?22

2$8($

CI?TI&1

C3?T CC3?T

J)J H: #: #))@ #@H H: )@ )@

) @)J @JJ J)J 00 F0 @JJ F0 ):@F

0 @)J :)@ JH@ 0 0: :)@ @H 0

: )J 0 )@H :@ F:: 0 )J@ :F))

@ )J 0J :0 : H: 0J )@: J

@)J ) )@H :@ F:: ) J@ F

@J ))) :)F : H@ ))) H F0J

F @)J FF 00) ::J FH) FF JFJ H::J

H )J J J@J 0: J0 J F0 J0J0

J 0J 0 : 0F F 0 H)0 ))

T&T?

+

:J :0@: J)@ 00F: F) :0@: ))

0


38/60

8resent value cash inflow ):

8resent value cash outflow@)@

1$T 8($4$1T ?+5$ %$T*&2

1et present value cash inflow > cash outflow

): > @)@

18 , 0 :H

8(&3IT?BI+IT6 I12$V

8.I Total present value of cash inflow G total investment

0F

6$?(4 C3?T 8,0 T&T?+ 8 8,)J T&T?+

8

CC3?T

)@ .FF:H )F .F0000 J) )@

) F0 .F0@ H) .H::: F)) ):@F

0 @H .H0J@ FJ0 .@FJ 0: )J@ .00) 0H .:F))@ @F :F))

@ )@: .@:) F .:JFF @J: J

J@ .:FJ0) @0 .00:HJ 0J F

H .:)@J @J .)HJF 0)H F0J

F JFJ .0 :J .00)@ 0@H H::J

H F0 .00)FF )F .H0F J0J0

J H)0 .)H:@H )) .@ :H ))

T&T?+ ): :@:


39/60

): G @)@

.)) Times

I1T$(1?+ (?T$ &3 ($T5(1

I(( +&/$( (?T$ N Inflows at lower rate# investment ##################################################### Inflows at lower rate > inflow at higher rate

0 N ): > @)@ #####################

): > :@:

0 N :.

. &( F

8?6 B?CO 8$(I&2

8ay back period based period N investment > CC3?T ############################ 1e!t CC3?T

: N 0J0 ######

)@:

: N .)

:.) %onths

($T5(1 &1 I1$4T%$1T

(eturn on investment ?verage cash inflow W JJ

0H


40/60

################################## ?verage investment

?verage cash inflow ))GJ )).

?verage investment @)@G ) )@).@

(&I )).HG)@).@ W JJ

:0.F &( ::

T?B+$ 1&.0.J)

8(&-$CT )7 E$4TI%?T$ B52A$T (4 J)@J +?O*4D

:J


41/60

6$?( 8B2T +$44

2$8($

CI?TI&1

?4 8$(

T?V

8BT +$44

T?V

00

8?T ?22

2$8($

CI?TI&1

C3?T CC3?T

0JJ 0@FF #@)F #: #0@: 0@FF 0)0: 0)0:

) :@J HHH 0@ : )0F HHH 00F@ H

0 :@J F:H 0 ))@ ):F F:F 000@ HH@:

: :FJ )) :0F 0 )) )) 0:H: 0::F

@ @J : :@: @JJ 0J: : 0J JF

:@J @)) :J0F 000 )J@ @)) 0)) )J00@

:H@J ::0 :@J :F 0J)J ::0 0:0 )0HF

F :@J 0 :F0 0FJ )FJ0 0 0FJ )HF

H 00J 0)J 00J JH) ))F 0)J )@0F )H@

J 0H0J )) 0@F )J ):@ )) ))0 0))0H

T&T?

+

:0F0J FJ 0@): @H )0@00 FJ 0))0H

:


42/60

INTERPRITATION:

8resent value cash inflow FH

8resent value cash outflowJ)@J

1$T 8($4$1T ?+5$ %$T*&2


FH # J)@J

18 , 0 @H

8(&3IT?BI+IT6 I12$V


FHGJ)@J

:)

6$?(4 C3?T 8,0 T&T?+ 8 8,)J T&T?+

8

CC3?T

0)0: .FF:H )F) .F:J )@: 0)0:

) 00F@ .F0@ )@ .)JJJ )JHH H

0 000@ .H0J@ )0 .:FFJ )F HH@:: 0:H: .00) ):0 .0F::J 0:0 0::F

@ 0J .@:) HF .0J)F JF JF

0)) .:FJ0) @@J .):HH FJ )J00@

0:0 .:)@J :) .HF0: F )0HF

F 0FJ .0 H .@: @J )HF

H )@0F .00)FF F:) .):H0 0 )H@

J ))0 .)H:@H FJ) .JHH@ )J 0))0H

T&T?+ 0))0H FH 0J@


43/60

.: Times

I1T$(1?+ (?T$ &3 ($T5(1

I(( +&/$( (?T$ N inflows at lower rate# investment ####################################################

inflows at lower rate > inflow at higher rate

0 N FH # J)@J

#####################): > :@:

0 N @.

)F

8?6 B?CO 8$(I&2

8ay back period based period N investment > CC3?T

############################ 1e!t CC3?T

0 N )H ######

0:H:

0 N .JF

0. %onths

($T5(1 &1 I1$4T%$1T

(eturn on investment ?verage cash inflow W JJ ################################# ?verage investment

:0


44/60

?verage cash inflow 0))0HGJ 0))0.H

?verage investment J)@JG ) @)@

(&I 0))0..HG@)@ W JJ

).H &( 0

T?B+$ 1&.0.J0

8(&-$CT 07 E$4TI%?T$ B52A$T (4 :)@ +?O*4D

::


45/60

6$?( 8B2T +$44

2$8($

CI?TI&1

?4 8$(

T?V

8BT +$44

T?V

00

8?T ?22

2$8($

CI?TI&1

C3?T CC3?T

0J ::: #0F #0 #) 0J F) F)

) :@ :J) @: F 0 :@ :0F )J

0 :@ 0:) : 0F :@ :F @0F

: :F )H H@ : 0 :F :)) HJ

@ @ ): )H FH FJ @ :) )0F

:@ )J ): F @ :@ 0@ ))

:H@ F 0 J@ )) :H@ 0HJ 0@)

F :@ @) 0J: JJ )J: :@ 0@ 0@JF

H 00 )H )0: @ 00 )F 0H:

J 0H0 J )F0 H0 HJ 0H0 0JJ :JH:

T&T?

+

:0F0 0@J@ FF )FH @FH :0F0 :JH:

:@


46/60

INTERPRITATION:

8resent value cash inflow )0H

8resent value cash outflow:)@

1$T 8($4$1T ?+5$ %$T*&2


)0H # :)@

18 , 0 # 0:

8(&3IT?BI+IT6 I12$V


:

6$?(4 C3?T 8,0 T&T?+ 8 8,)J T&T?+

8

CC3?T

F) .FF:H J: .HJHJH )J F)

) :0F .F0@ 0:0 .F)@: 0) )J

0 :F .H0J@ )HJ .@0 0: @0F: :)) .00) )@H .F0J )FF HJ

@ :) .@:) )0) .)JH) )@ )0F

0@ .:FJ0) FJ .@:: )) ))

0HJ .:)@J .@0 )JJ 0@)

F 0@ .0 0: .:@ 0@JF

H )F .00)FF H@ .:):J ) 0H:

J 0JJ .)H:@H FF .0@JJH J@ :JH:

T&T?+ :JH: )0H )@0


47/60

)0HG:)@

.@F Times

I1T$(1?+ (?T$ &3 ($T5(1

I(( +&/$( (?T$ N Inflows at lower rate# investment ####################################################

Inflows at lower rate > inflow at higher rate

?s a sum of pre#discounted cash inflow is less then cost of investment there can;t be I((

&( I(( S J

8?6 B?CO 8$(I&2

8ay back period based period N Investment > CC3?T ########################## 1e!t CC3?T

Total investment has not been realised by cash inflow" so there is no pay back period.

($T5(1 &1 I1$4T%$1T

(eturn on investment ?verage cash inflow W JJ ##################################

:


48/60

?verage investment

?verage cash inflow :JH:GJ :JH.:

?verage investment :)@G ) )J).@

(&I :JH.:G)J).@ W JJ

H.F &( )J

T?B+$ 1&.0.J:

8(&-$CT :7 E$4TI%?T$ B52A$T (4 F)@ +?O*4D

:F


49/60

6$?( 8B2T +$44

2$8($

CI?TI&1

?4 8$(

T?V

8BT +$44

T?V

00

8?T ?22

2$8($

CI?TI&1

C3?T CC3?T

)) )F:: #)) #@F #@: )F:: HJ HJ

) ) H) FFJ )HJ @HJ H) 0F) 0J)

0 ) 0 HHH 00J H 0 0:) :::

: F) @) )J 0HH F @) 0F0 @H

@ FH) :F :J@ :: H: :F :)F ))@

) :: )@F :@ F:0 :: )@ F:F)

F@ 0@ :: :F0 HF 0@ 00) HF:

F ) )HH 00 :@0 H)J )HH )H J00

H 00 )@: J 0@@ )) )@: H )JJH

J :: ) ))@ :J: F) ) J0 0J:

T&T?

+

J HJ) HH 0J)@ :: HJ) 0J:

:H


50/60

INTERPRITATION:

8resent value cash inflow 0HJ

8resent value cash outflowF)@

1$T 8($4$1T ?+5$ %$T*&2


0HJ > F)@

18 , 0 # 0@

8(&3IT?BI+IT6 I12$V


0HJGF)@

@J

6$?(4 C3?T 8,0 T&T?+ 8 8,)J T&T?+

8

CC3?T

HJ .FF:H :H .HJJHJ @)0 HJ

) 0F) .F0@ JF) .F) )) 0J)

0 0:) .H0J@ H0J .0H HF) :::: 0F0 .00) F:F .@F0 H @H

@ :)F .@:) @ .@H0:@ F: ))@

)@ .:FJ0) J: .@0: ) F:F)

00) .:)@J @ .:F :) HF:

F )H .0 :@H .:00H0 @)H J00

H H .00)FF 0)@ .0HJH) 0F) )JJH

J J0 .)H:@H 0J@ .0@)F 0@ 0J:

T&T?+ 0J:


51/60

.JH Times

I1T$(1?+ (?T$ &3 ($T5(1



N 0HJ > F)@

#####################

H@ # 0HJ

> J.@

J.:

8?6 B?CO 8$(I&2

8ay back period based period N investment > CC3?T ############################ 1e!t CC3?T

@ N F)@ # ))@ ##############

)@

@ N .

@. %onths

($T5(1 &1 I1$4T%$1T

(eturn on investment ?verage cash inflow W JJ##################################?verage investment

@


52/60


53/60

T?V

H.F ) #@FJ.) H.@ 0FF. ) )F0.0 )F0.0

) 0.F F #@J.) #. #00. F @0.: :0.

0 0.F @H #)).) #.0 #:.H @H ::. @FJ.F

: :@.F 0@ J.F 0. .) 0@ :).) )0

@ @:.F @ 0H.F 0. ). @ :. F:.

0.F HF 0F.F ).F ).J HF ):.J HFF.

:F.@ F0 @.@ ). :0.H F0 ).H @.

F 0.F @.F ). ::. @. )0J.

H JF.H J :F.H . 0).F J H).F 0)0.@

J .H @ .H )). ::.F @ [email protected] :H.0

T&T?

+

0:.H 0 #0. #J:.: #). 0 :H.0

@0


54/60

INTERPRITATION:

8resent value cash inflow F@

8resent value cash outflowH)J

1$T 8($4$1T ?+5$ %$T*&2


F@ # H)J

18 , 0 JH

8(&3IT?BI+IT6 I12$V


@:

6$?(4 C3?T 8,0 T&T?+ 8 8,)J T&T?+

8

CC3?T

)F0.0 .FF:H )@ .HJJHJ )@ )F0.0

) @0.: .F0@ )J .F)@: ) :0.

0 ::. .H0J@ JJ .@0 JF @FJ.F: :).) .00) F .F0J H )0

@ :. .@:) .)JH) FF F:.

):.J .:FJ0) J .@:: J HFF.

).H .:)@J @: .@0 @ @.

F @. .0 :0 .:@ @: )0J.

H H).F .00)FF 0 .:):J 0H 0)0.@

J [email protected] .)H:@H )F .0@JJH 0 :H.0

T&T?+ :H.0 F@ H:)


55/60

F@GH)J

J.:: Times

I1T$(1?+ (?T$ &3 ($T5(1



?s a sum of pre#discounted cash inflow is less then cost of investment there can;t be I((

&( I(( S J

8?6 B?CO 8$(I&2

8ay back period based period N investment > CC3?T

############################ 1e!t CC3?T

Total investment has not been realised by cash inflow" so there is no pay back period

($T5(1 &1 I1$4T%$1T

(eturn on investment ?verage cash inflow W JJ##################################?verage investment

@@


56/60

?verage cash inflow :H.0GJ :.H0

?verage investment H)JG ) HJ

(&I :.H0GHJ W JJ

:.F &( @

IV. CONCLUSIONS AND SUGGESTION :

The study concerned with the capital budgeting with reference to *?$(IT?A$" the date

is collected" organised analysed and interpreted. *?$(IT?A$ has a good organisation

@


57/60

culture" e!cellent working environment and a very precioHus asset that is highly dedicate"

hardworking well qualified efficient and knowledgeable workforce.

The following findings are obtained from the analysis of data

The first proect ie." generation is the unequal cash flows for J years" the initial

investment is (s @")@ lakhs.

D 18 and I(8 are positive for the proposal. Then the required rate of

return .

)D The profitability inde! is .)) times X

0D The return of investment is :0.F .

The second proect ie." generation is the unequal cash flows for J years. The

initial investment is (s J")@J lakhs

D The discounted 8B8 is 0. years" the investment will recover in 0 years

and month

)D 18 and I(( are positive for the proposal then the required rate ofreturn )F

0D The profitability inde! is .: times.

:D The return of investment is ).H

The third proect ie." generation is the unequal cash flows for J years. The initial

investment is (s :)@ lakhs

D Total investment has not been realised by the cash inflow. 4o there is no

pay back period E8B8D.

)D 18 and I(( are negative for the proposal as a sum of pre#discounted

cash inflow is less than cost of investment there can;t be I(( EorDI((SJ.

0D The profitability inde! is J.@F times" it is not good.

@


58/60

:D The return of investment is H.F .

The fourth proect ie." generate is the unequal cash flows for J years. The initial

investment is (s7F)@ lakhs.

D The discounted 8B8 is @. years. The investment will recover in @ years

and months.

)D 18 and I(( are negative for the proposal then th required rate of return

J.:.

0D The profitability inde! is J.H times" it is not good sign.

:D The return of investment is 0) .

The fifth proect ie." generation is the unequal cash flows for J years. The initial

investment is (s H)J lakhs

D Total investment has not been realised by the cash inflow. 4o there is no

pay back period E8B8D.

)D 18 and I(( are negative for the proposal as a sum of pre#discounted

cash inflow is less than cost of investment there can;t be I(( EorDI((SJ.0D The profitability inde! is J.:: times" it is not good.

:D The return of investment is :.F .

3irst proect in all conte!ts 8B8 of :.) years" 18" I((" (&I and 8I are positive

as its return are positive sign therefore the proect is accepted.

4econd proect in all conte!ts 8B8 of 0. years" 18" I((" (&I and 8I are

indicating of positive sign therefore the proect is accepted.

Third proect 18 and I(( are negative for the proposal as a sum of pre

discounted cash inflow is less than cost of investment there can;t be I(( EorD I((

SJ. Total investment has not been realised by the cash inflow" so there no 8B8.

@F


59/60

The 8X I is J.@F times" it is not a good" (&I is )J" it indicating values so the

proect is required.

3ourth proect 18 is negative sign and I(( is J.:" 8I is J.H times this is not

good sign" 8B8 is @. months" (&I is 0) the proect if may increase the 18

may get profits so the proect is accepted.

3ifth proect 18 and I(( are negative for the proposal as a sum of pre

discounted cash inflow is less than cost of investment there can;t be I(( EorD I((

SJ. Total investment has not been realised by the cash inflow" so there no 8B8.

The 8X I is J.:: times" it is not a good" (&I is @ " it indicating values so the

proect is required.

BIBILIOGRAPH

Aupta 4hahi O 9 4harma" (.O. 3inancial %anagementR theory and practice 0 rd

edition )JJ" Oalyani 8ublishers.

Ohan %.6. 9 -ain 8.OR Te!t" problems and cases : thedition" )JJ:.

@H


60/60

I.%. 8andey7 3inancial %anagement Hth edition )JJ@ ikas 8ublishing *ouse

8rivate +imited.

8rasanna Chandra7 3inancial %anagement7 Theor:y and 8ractise @thedition )JJ.

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