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Class 19

The document summarizes the capital expenditure and projected annual income statement for a proposed project by Gajapati Metals Ltd. to produce an imported raw material domestically. It lists the capital costs totaling Rs. 1080 lakhs and annual income of Rs. 1440 lakhs with expenditures of Rs. 1260 lakhs, leaving a profit of Rs. 180 lakhs. It asks to estimate the social value of the project over its 10 year life using the LM approach, factoring in a working capital requirement of Rs. 200 lakhs.

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160 views5 pages

Class 19

The document summarizes the capital expenditure and projected annual income statement for a proposed project by Gajapati Metals Ltd. to produce an imported raw material domestically. It lists the capital costs totaling Rs. 1080 lakhs and annual income of Rs. 1440 lakhs with expenditures of Rs. 1260 lakhs, leaving a profit of Rs. 180 lakhs. It asks to estimate the social value of the project over its 10 year life using the LM approach, factoring in a working capital requirement of Rs. 200 lakhs.

Uploaded by

bando007
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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• Gajapati Metals Ltd.

is evaluating a project to produce a particular


raw material, which is being imported. The capital expenditure
estimation for the project is shown in the following table:
Capital Expenditure (Rs. in lakhs)

Land 50

Buildings 120

Imported equipment 80
(CIF value:Rs.100 lakh)
Indigenous Equipment 700
(CIF value of similar equipment: Rs.600 million)
Transportation cost 20

Technical know-how fees 50

Preoperative expenses 50

Bank charges 10
Total 1080
Projected annual income statement of the
company
Income Rs. In Lakhs
Net Sales(18,000 tonnes @ Rs.80,000 per tonne, FOB value 1,440
Rs.70,000 per tonne)
Expenditure
Imported raw material(CIF value Rs.80 lakh) 100
Indigenous raw materials 800
Labour 80
Salaries 50
Repairs and maintenance 20
Water, fuel,etc. 80
Electricity(Rate=40,Duty=20) 60
Other overheads 70
Profit before tax 180
• If the life of the project is 10 years and working capital requirement is
Rs.200 lakh (CIF value is Rs.175 lakh) estimate the social value of the
proposed project as per LM approach.

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