Case Study: Deepak Hand tools Private Limited DHPL is a small sized firm manufacturing hand tools. It manufacturing plan is situated in Haryana. The company’s sales in the year ending on 31st March 2007 were Rs.1000 million (Rs.100 crore) on an asset base of Rs.650 million. The net profit of the company was Rs.76 million. The management of the company wants to improve profitability further. The required rate of return of the company is 14 percent. The company is currently considering an investment proposal. One is to expand its manufacturing capacity. The estimated cost of the new equipment is Rs.250 million. It is expected to have an economic life of 10 years. The accountant forecasts that net cash inflows would be Rs.45 million per annum for the first three years, Rs.68 million per annum from year four to year eight and for the remaining two years Rs.30million per annum. The plant can be sold for Rs.55 million at the end of its economic life. The company would need to raise debt to the extent of Rs.200 million. The company has the following options of borrowing Rs.200 million: a. The company can borrow funds from a nationalized bank at the interest rate of 14 percent for 10 years. It will be required to pay equal annual installment of interest and repayment of principal. b. A financial institution has offered to lend money to DHPL at 13.5 per annum but it needs to pay equated quarterly installment of interest and repayment of principal. Questions: 1. Should the company expand its capacity? Show the computation of NPV 2. What is the annual installment of bank loan? 3. Calculate the quarterly installments of the Financial Institution loan 4. Should the company borrow from the bank or from the financial institution?

6474

What skills do you need for a presentation?

301

What are the features of change request management?

1

Can we nest the updatepanel controls? : asp.net ajax

897

What is xsd file in c#?

876

Can structs inherit swift?

884

what is the meaning of osr in transformer.

2050

Mention some of the important characteristics of neo4j?

5

Explain the importance of origanizational,cultural and political issues in the process of merger integration.

1909

How does pediatric neurology differ from adult neurology, and what considerations are important when diagnosing and treating neurological disorders in children?

1

Explain jta, jndi, and jms.

965

Define what is a silver and deming drill bit?

876

What do you mean by bean wiring?

354

What is transport reliability in wcf?

784

What is the use of cls dos command?

527