1.Should the company expand its capacity? 2.

What is the minimum amount of sav

Interest 14% Net cash outlay
Salvage value 55 million life(t)
initial investment 250 million i
Year Cash inflow Present Value Annuity ₹ 9.59
0 -250 -250.00 The minimum amount of savings from
1 45 39.47
2 45 34.63 3. What is the annual instalment of th
3 45 30.37 Loan 200
4 68 40.26 i 14
5 68 35.32 n 10
6 68 30.98 Annuity ₹ 38.34
7 68 27.18 The annual instalment of SBI loan is Rs
8 68 23.84
9 30 9.23 4.What amount of the single payment
10 85 22.93 Loan 200
Net Present
Value(NPV) 44.20 i 14
n 10
NPV is positive. This means that the idea of expansion is
profitable one and the company should expand its capacity Future Val ₹ 741.44
A single payment of interest and princ

5.Calculate the quarterly instalments of the financial institution loan? 6.Should the company borro
Loan 200 million Company has to pay a total
i 3.375 percent million if borrowed from the
n 40 times From SBI
Annuity ₹ 9.20 million From Fin Inst
The quaterly instalments of the financial instituiton loan would amount Hence, the company should
to Rs 9.73 million

7.Would you recommend borrowing from the financial institution or get the equipment on lease?
Lease rental 52 million
i 13.5 percent
n 10 years
PV ₹ 313.96 million

The value of lease rental is higher than the total expense value(200+100=300 million). So, borrowing is cheaper
company should borrow from financial intituition rather than taking the equipment on lease.
e minimum amount of savings from the replacement that would justify the expenditure?
50 million
10 years
14 %
million
m amount of savings from the replacement each year will be Rs 9.59 million.

e annual instalment of the SBI loan?

million
percent
years
million
nstalment of SBI loan is Rs 38.34 million.

unt of the single payment of interest and principal to SBI after 10 years?
million

percent
years
million
ment of interest and principal to SBI after 10 years would account to Rs 741.44 million.

Should the company borrow from the SBI or the financial institution? Give reasons for your choice.
ompany has to pay a total loan of Rs 383.43 million if borrowed from BSI while a amount of Rs 367.87
illion if borrowed from the financial institution.
₹ 383.43 million
₹ 367.87 million
ence, the company should borrow loan from financial instituition

on lease?

So, borrowing is cheaper than rental. The

the equipment on lease.