Schedule -I

Calculation of Sales Revenue

Installed Capacity 114,000 kilometres (km)*

Fiscal Year 2017/18 2018/19 2019/20 2020/21 2021/22

Particulars Basis/ Formula

Capacity Utilization 60% 70% 80% 90% 90%

Forecasted Production (in km) CapUtility%*Installed Capacity 68,400 79,800 91,200 102,600 102,600

Stock Movement
Opening Balance (in km) 0 6559 7652 8745 9838
Production (in km) 68400 79800 91200 102600 102600
Closing Balance (in km): 35 days stock (35/365) × Production Quantity 6559 7652 8745 9838 9838
(Finished Goods - 30 days and
Work-in-progess - 5 days)

Quantity Available for Sale

Optical Fibre Cable (in km) OpenStock+ProductQty-CloseStock 61,841 78,707 90,107 101,507 102,600
Average Realization (₹ per km) "The Project" in the case, para 3 25,775 25,775 25,775 25,775 25,775
Sales Revenue (₹ Millions) ForecastedSalesQty*Avg.Selling Price 1,593.95 2,028.67 2,322.51 2,616.34 2,644.52

Note: *See case Exhibit 3

Source: Created by the author.
ometres (km)*
Schedule -II

Total Operating Cost

(₹ Millions)
Fiscal Year 2017/18 2018/19 2019/20 2020/21 2021/22
Particulars Basis

Raw Material Consumption Cost 75% of Sales Revenue 1195.46 1521.50 1741.88 1962.26 1983.39
Repairs and Maintenance ₹15 per kilometre (km) 1.03 1.20 1.37 1.54 1.54
Power, Fuel, and Water ₹325 per km 22.23 25.94 29.64 33.35 33.35
Material Handling and Transport ₹100 per km 6.84 7.98 9.12 10.26 10.26
Other Manufacturing Expenses ₹550 per km 37.62 43.89 50.16 56.43 56.43
Total Variable Cost (A) 1263.18 1600.51 1832.17 2063.83 2084.96

Salaries ₹64.10 million 64.10 64.10 64.10 64.10 64.10

Selling, General, and Administrative Expenses ₹23.20 million 23.20 23.20 23.20 23.20 23.20
Depreciation ₹79.00 million 79.00 79.00 79.00 79.00 79.00
Total Fixed Cost (B) 166.30 166.30 166.30 166.30 166.30

Total Operating Cost A+B 1429.48 1766.81 1998.47 2230.13 2251.26

Source: Created by the author.

Schedule -III

Working Capital
(₹ Millions)
Description FY 2017/18 2018/19 2019/20 2020/21 2021/22
No. of Operating Days Days Formula 365 365 365 365 365
Current Assets (CA)
- - - - -
(No. of Days/365) × Raw Material
Raw Material Stocks 60 Consumption Cost 196.51 250.11 286.34 322.56 326.04
-

(No. of Days/365) × [Raw Material

Consumption Cost + 50% × (Other
Work In Progress 5 Variable Costs + Depreciation)] 17.38 21.92 25.02 28.12 28.41
(No. of Days/365) × Total Operating
Finished Goods Stocks 30 Cost 117.49 145.22 164.26 183.30 185.04
Debtors 105 (No. of Days/365) × Sales Revenue 458.53 583.59 668.12 752.65 760.75
Total - CA 789.92 1,000.84 1,143.73 1,286.62 1,300.23

Current Liabilities (CL)

(No. of Days/365) × Raw Material
Creditors for Raw Materials 90 Consumption Cost 294.77 375.17 429.50 483.84 489.05

(No. of Days/365) × (Total Variable

Cost - Raw material Consumption Cost
+ Selling, General, and Administrative
Creditors for Expenses 30 Expenses) 7.47 8.40 9.33 10.26 10.26
Total - CL 302.24 383.57 438.83 494.10 499.31

Net Working Capital Gap (WCG) CA - CL 487.68 617.28 704.90 792.53 800.92
Margin Money (% of WCG) 25% 25% × WCG 121.92 154.32 176.23 198.13 200.23

Maximum Permissible Bank Finance (MPBF) WCG - Margin Money 365.76 462.96 528.68 594.39 600.69
Schedule -III

Working Capital
Working Capital Interest
Interest Calculation FY 2017/18 2018/19 2019/20 2020/21 2021/22
Working Capital Liabilities Interest Rate % See "Other Assumptions" in the case. 14.00% 14.00% 14.00% 14.00% 14.00%
Working Captial Interest (₹ Millions) Interest Rate × MPBF 51.21 64.81 74.01 83.22 84.10
Current Ratio
Δ Net WCG 487.68 129.60 87.62 87.62 8.39

Source: Created by the author.

Schedule -IV

Cost of Project and Means of Finance

(₹ Millions)
Project Cost
Year 0
Particulars Fiscal Year 2016/17
Basis

Land and Land Development 13.20

Building and Civil Works 32.60
Plant and Machinery 232.20
Miscellaneous Fixed Assets 116.70
Preliminary and Pre-Operative Expenses 18.10
Interest during Construction 1.50
Contingency 19.74
Capital Expenditure 434.04
Margin Money WC FY 2017/18 121.92
Total Project Cost 555.95

Means of Finance

Particulars FY 2016/17
Equity Share Capital Balancing Figure 255.95
Long-Term Debt 300.00
Total Means of Finance Total Project Cost 555.95

Source: Created by the author.

Schedule -V

Calculation of Long-Term Debt Interest

(₹ Millions)
Fiscal Year 2017/18 2018/19 2019/20 2020/21 2021/22

Opening Balance 300.00 270.00 210.00 150.00 75.00

Yearly Repayment 30.00 60.00 60.00 75.00 75.00
Closing Balance 270.00 210.00 150.00 75.00 0.00
Interest @ 12% per year* 36.00 32.40 25.20 18.00 9.00

Note: *See "Other Assumptions" in the case.

Source: Created by the author.
Schedule -VI

Income Statement
(₹ Millions)

Fiscal Year 2017/18 2018/19 2019/20 2020/21 2021/22

Particulars Basis

Sales Revenue Sales 1,593.95 2,028.67 2,322.51 2,616.34 2,644.52

Raw Material Consumption Cost Operating Expenses (OPEX) 1,195.46 1,521.50 1,741.88 1,962.26 1,983.39
Repairs and Maintenance OPEX 1.03 1.20 1.37 1.54 1.54
Power, Fuel, and Water OPEX 22.23 25.94 29.64 33.35 33.35
Material Handling and Transport OPEX 6.84 7.98 9.12 10.26 10.26
Other Manufacturing Expenses OPEX 37.62 43.89 50.16 56.43 56.43
Total Cost 1,263.18 1,600.51 1,832.17 2,063.83 2,084.96
Add Opening Stock of Work in Progress Working Capital (WC) - 17.38 21.92 25.02 28.12
Less Closing Stock of Work in Progress WC 17.38 21.92 25.02 28.12 28.41
Cost of Production 1,245.80 1,595.96 1,829.07 2,060.74 2,084.67
Add Opening Stock of Finished Goods WC - 117.49 145.22 164.26 183.30
Less Closing Stock of Finished Goods WC 117.49 145.22 164.26 183.30 185.04
Cost of Goods Sold (COGS) 1,128.31 1,568.24 1,810.03 2,041.69 2,082.93

Gross Profit Sales - COGS 465.64 460.44 512.48 574.65 561.58

Salaries OPEX 64.10 64.10 64.10 64.10 64.10
SG&A Expenses OPEX 23.20 23.20 23.20 23.20 23.20
Earnings before Interest, Tax, Depreciation, and Amortization 378.34 373.14 425.18 487.35 474.28
Depreciation OPEX 79.00 79.00 79.00 79.00 79.00
Operating Profit (Earnings before Interest and Tax) 299.34 294.14 346.18 408.35 395.28
Interest on Long-Term Debt Long-term Debt 36.00 32.40 25.20 18.00 9.00
Interest on Working Capital Loan WC 51.21 64.81 74.01 83.22 84.10
Profit Before Tax 212.14 196.92 246.96 307.13 302.18

Tax @ 30% Case, "Other Assumptions" 63.64 59.08 74.09 92.14 90.66
Profit after Tax 148.50 137.84 172.87 214.99 211.53

Note: SG&A = selling, general, and administrative expenses.

Source: Created by the author.
Schedule -VII

Balance Sheet
(₹ millions)
Year 0
Fiscal Year 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Particulars Basis

Sources of Funds

Cost of Project &

Equity Means of Finance 255.95 255.95 255.95 255.95 255.95 255.95
Cumulative Surplus/Deficit in Profit and Loss (P&L) P&L 0.00 148.50 286.34 459.21 674.21 885.74
Net Worth 255.95 404.45 542.30 715.17 930.16 1141.69

Long-term Debt Long-Term Debt 300.00 270.00 210.00 150.00 75.00 0.00
Working Capital (WC) Loan WC: MPBF 0.00 365.76 462.96 528.68 594.39 600.69
Loan Funds 300.00 635.76 672.96 678.68 669.39 600.69

Total Sources 555.95 1040.21 1215.25 1393.84 1599.56 1742.38

Application of Funds

Cost of Project &

Fixed Assets: Gross Block Means of Finance 434.04 434.04 434.04 434.04 434.04 434.04
Less Cumulative Depreciation P&L 0.00 79.00 158.00 237.00 316.00 395.00
Net Fixed Assets 434.04 355.04 276.04 197.04 118.04 39.04

Raw Material Stock Working Capital (WC) 0.00 196.51 250.11 286.34 322.56 326.04
Work in Progress WC 0.00 17.38 21.92 25.02 28.12 28.41
Finished Goods Stock WC 0.00 117.49 145.22 164.26 183.30 185.04
Debtors WC 0.00 458.53 583.59 668.12 752.65 760.75
Cash Bal. Figure 121.92 197.50 321.94 491.91 689.00 902.43
Current Assets, Loans, & Advances 121.92 987.42 1322.78 1635.64 1975.62 2202.66

Creditors for Raw Materials WC 0.00 294.77 375.17 429.50 483.84 489.05
Creditors for Expenses WC 0.00 7.47 8.40 9.33 10.26 10.26
Current Liabilities and Provisions 0.00 302.24 383.57 438.83 494.10 499.31

Net Current Assets 121.92 685.17 939.22 1196.81 1481.52 1703.35

Total Application of Funds 555.95 1040.21 1215.25 1393.84 1599.56 1742.38

Note: MPBF = maximum permissible banking finance.

Source: Created by the author.
Schedule -VIII

Calculation of Net Present Value (NPV)/Internal Rate of Return (IRR)

(₹ Millions)
Year 0
Fiscal Year 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
Particulars Basis

Cost of Project &

Initial Investment Means of Finance -434.04

Operating Cash Inflows

Earnings before Interest and Tax (EBIT) Profit & Loss (P&L) 299.34 294.14 346.18 408.35 395.28
Less Interest on Working Capital (WC) P&L 51.21 64.81 74.01 83.22 84.10
EBIT Adjusted 248.14 229.32 272.16 325.13 311.18
Tax @ 30% 74.44 68.80 81.65 97.54 93.36
EBIT Adjusted (1-Tax) 173.70 160.52 190.51 227.59 217.83
Depreciation P&L 79.00 79.00 79.00 79.00 79.00
Case, "Other
Salvage Value Assumptions" 20.80
Net Working Capital Recovered WC 800.92
Total Cash Inflows -434.04 252.70 239.52 269.51 306.59 1118.55

Operating Cash Outflows

Δ Net Working Capital Gap WC 487.68 129.60 87.62 87.62 8.39

Free Cash Flows -434.04 -234.98 109.92 181.89 218.97 1110.15

Case, "Other
NPV @ 14.7% per year (₹ millions) Assumptions" 218.74
IRR (in %) 24.74%
Schedule -IX

Debt-Service Coverage Ratio

(₹ millions)

Fiscal Year 2017/18 2018/19 2019/20 2020/21 2021/22

Particulars Basis

Profit after Tax Profit & Loss (P&L) 148.50 137.84 172.87 214.99 211.53
Depreciation P&L 79.00 79.00 79.00 79.00 79.00
Interest on Long-Term Debt P&L 36.00 32.40 25.20 18.00 9.00
Cash Accruals (A) 263.50 249.24 277.07 311.99 299.53

Interest on Long-Term Debt P&L 36.00 32.40 25.20 18.00 9.00

Repayment of Long-Term Debt Long-Term Debt 30.00 60.00 60.00 75.00 75.00
Debt Service (B) 66.00 92.40 85.20 93.00 84.00
Debt-Service Coverage Ratio (A/B) 3.99 2.70 3.25 3.35 3.57
Average Debt-Service Coverage Ratio 3.37
Minimum Debt-Service Coverage Ratio 2.70

Source: Created by the author.

Schedule -X

Break-Even Point (BEP) Analysis

(₹ millions)

Fiscal Year 2017/18 2018/19 2019/20 2020/21 2021/22

Particulars Basis/Formula

Capacity Utilization Sales 60% 70% 80% 90% 90%

Net Sales (S) Sales 1,593.95 2,028.67 2,322.51 2,616.34 2,644.52

Variable Costs Operating Expenses (OPEX) 1,263.18 1,600.51 1,832.17 2,063.83 2,084.96

(Opening Work in Progress -

Closing Work in Progress) +
(Opening Finished Goods -
Stock Adjustments Closing Finished Goods) (134.87) (32.27) (22.14) (22.14) (2.03)
Total Variable Cost (VC) 1,128.31 1,568.24 1,810.03 2,041.69 2,082.93

Contribution (C) S - VC 465.64 460.44 512.48 574.65 561.58

Fixed Costs OPEX 166.30 166.30 166.30 166.30 166.30

Interest - Long-Term Debt Profit & Loss (P & L) 36.00 32.40 25.20 18.00 9.00
Interest - Working Capital P&L 51.21 64.81 74.01 83.22 84.10
Total Fixed Cost (FC) 253.51 263.51 265.51 267.52 259.40
Cash FC FC - Depreciation 174.51 184.51 186.51 188.52 180.40
C/S Ratio 0.29 0.23 0.22 0.22 0.21

Break-Even

BEP Sales (in ₹ millions) Total Fixed Cost/C/S Ratio 867.78 1,161.04 1,203.30 1,217.98 1,221.51

Break-Even Capacity (BEP/S)* Capacity Utilization 32.67% 40.06% 41.45% 41.90% 41.57%
Average Break-Even Capacity 39.53%
Schedule -X

Break-Even Point (BEP) Analysis

(₹ millions)

Fiscal Year 2017/18 2018/19 2019/20 2020/21 2021/22

Particulars Basis/Formula
Cash Break Even
Cash Break-Even Point (CBEP)
Sales (in ₹ millions) Cash Fixed Cost/C/S Ratio 597.35 812.97 845.27 858.30 849.50
Cash Break-Even Capacity (CBEP/S)* Capacity Utilization 22.49% 28.05% 29.12% 29.52% 28.91%
Average Cash Break-Even Capacity 27.62%

Source: Created by the author.

Schedule -XI

Ratio Analysis

Fiscal Year 2017/18 2018/19 2019/20 2020/21

Ratio Formula

Profitability
Net Profit Ratio Profit After Tax/Sales 9.32% 6.79% 7.44% 8.22%
Earnings Before Interest and
Return on Capital Employed Tax/Average Capital Employed 37.51% 26.08% 26.54% 27.28%

Leverage
Long-Term Debt/Equity Shareholders'
Debt Equity (D/E) Ratio Fund 0.67 0.39 0.21 0.08
Total Outside Liabilities/Tangible Net Worth (TOL/TNW) Ratio Total Loan Funds/Net Worth 1.57 1.24 0.95 0.72

Coverage

Fixed Assets Coverage Ratio Net Fixed Assets/Long-Term Debt 1.31 1.31 1.31 1.57

Earnings Before Interest and

Tax/Interest on Long-Term Debt &
Interest Coverage Ratio Working Capital Loan 3.43 3.03 3.49 4.03
Equity Share Capital/Total Project
Promoter's Contribution to Project Cost Cost 46.04%

Liquidity
Current Ratio Current Assets/Current Liabilities 1.48 1.56 1.69 1.82

(Current Assets - Inventory)/Current

Quick Ratio Liabilities 0.98 1.07 1.20 1.32
Ratio Analysis

Fiscal Year 2017/18 2018/19 2019/20 2020/21

Ratio Formula
Source: Created by the author.
2021/22 Average

8.00% 7.95%

23.66% 28.21%

0.00 0.27
0.53 1.00

NA 1.38

4.25 3.65

2.00 1.71

1.51 1.22
 Schedule -XIV

Summary of Evaluation Results

Bank Standard
Serial Industry
Parameter Project Lending Evaluation Minimum/
Number Average
Norm Maximum

1a Internal Rate of Return (IRR) 24.74%

b IRR Spread (IRR − Weighted Average Cost of Capital) 10.04% 4% to 5% Accept Minimum

2a Average Debt-Service Coverage Ratio 3.37 2.00 Accept Minimum

b Minimum Debt-Service Coverage Ratio 2.70 1.00 Accept Minimum

Profitability
3 Average Net Profit Ratio 7.95% 3.20% Accept Minimum
4 Average Return on Capital Employed 28.22% 15.30% Accept Minimum

Leverage
5 Average Debt Equity Ratio 0.27 1.50 0.36 Accept Maximum
6 Average Total Outside Liabilities/Tangible Net Worth 1.00 3.00 2.37 Accept Maximum

Coverage
7 Average Fixed Assets Coverage Ratio 1.38 1.40 Not Accept Minimum
8 Average Interest Coverage Ratio 3.65 2.00 3.15 Accept Minimum

9 Promoter's Contribution to Project Cost 46.03% 25% to 30% Accept Minimum

Liquidity
10 Average Current Ratio 1.71 1.33 1.62 Accept Minimum
11 Average Quick Ratio 1.22 1.12 Accept Minimum
Source: Created by the author.
Schedule -XII

Sensitivity Analysis

Sensitivity Analysis Case Base Case Percent Change

100%

Input
Change
Decrease in Capacity Utilization 100% Decrease
Decrease in Selling Price 100% Decrease

Output

Internal Average Debt- Average Break-

Rate of Service Coverage Even Capacity
Return Ratio
24.74% 3.37 39.53%

Source: Created by the author.

Schedule -XIII

Summary of Sensitivity Analysis Results

Sensitivity
Internal Rate of Average Debt-Service Average Break-Even
Return Coverage Ratio Capacity
in % in %

Base Case 24.74% 3.37 39.53%

Capacity Utilization Decreases by 10% 20.98% 2.89 38.03%
Selling Price Decreases by 10% 21.07% 2.93 43.52%

Maximum 24.74% 3.37 43.52%

Minimum 20.98% 2.89 38.03%

Source: Created by the author.