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?

0 Answers   IIRM,

---

What are the most important goals of accounts receivable?

0 Answers  

---

In which account does the unpresented cheque will get recorded?

0 Answers  

---

A=27, B=63 What is d % Difference between 2?

1 Answers  

---

i wanted to know that how much percent TDS deducted any kind of works, like civil work and Electricals works, machinery, ducting work, security service,

5 Answers  

---

if we import the good from usa rs 50000 and deposite in ware house what is the entry in tally

0 Answers  

---

what are the different types of expenditures considered for the purpose of accounting?

0 Answers  

---

How to do accounting entries in Accounts Payable

0 Answers   Accenture,

---

Calculation of Gross Profit Or Gross Loss give example?

2 Answers   EDS,

---

what is the amount withdrawlfrom other cbs branch by multicity chequ book.

0 Answers  

---

What is the below line item and above line item and where this terminology is used?

2 Answers  

---

WHETHER WE CAN BOOK ALL PRELIMINARY EXPENSES, INCLUDING ACCESSORIES RELATED TO PURCHASE OF A NEW VEHICLE TO CAPITAL EXPENDITURE?

0 Answers  

---