Economic Analysis
Economic Analysis
COST OF PROJECT
Land
Land Area=500 sq mt
Cost per unit area of land=2000 INR
Total cost=10 Lakhs
Fixed Capital
=Capital invested in (Land+ Factory Shed & Building+ Plant & Machinery)
=10+15+53
=78 Lakhs
Working Capital
=capital invested in (raw material+power+wages+maintenance)
=40 Lakhs
MEANS OF FINANCE
Promoter's Contribution
=38 Lakhs
Excise Duty
An excise or excise tax (sometimes called a duty of excise special tax) is commonly
referred to as an inland tax on the sale, or production for sale, of specific goods.
=12.36% of (Cost as per Quotation)
=12% (42.84)
=5.30
Freight Charges
A freight rate is a price at which a certain cargo is delivered from one point to
another.
=0.4 Lakhs
REVENUE REALIZATION
Sales Realization
= sales (in kg)*selling price (per kg)
= (210000-4900)*125
= 25637500
= (Units Consumed/annum)*(Rate/Unit)
=257040*5.50
=1413720.00
Fringe benefit: This includes Provident Fund and Employees State Insurance.
During the first financial year there will be no expenditure on repairs & maintenance
(considering warranty). There after expenditure of Rs. 5000/- per month is
considered reasonable with an increase of 10% p.a.
Written down Value (WDV): It is the depreciated value of an asset for purpose of
taxation.
Depreciation on Factory Shed & Building has been calculated @ 10% p.a. on W.D.V.
method as per Income Tax Rules
Rate of Depreciation=10%
Depreciation
= WDV* Rate of Depreciation
=1,500,000.00*0.1
=150,000.00
WDV of Shed & Building at year end=( WDV of Shed & Building at year beginning)-
( Depreciation)
=1,500,000.00-150,000.00
=1,350,000.00
Depreciation on Plant & Machinery has been calculated @ 15% p.a. on W.D.V.
method as per Income Tax Rules
Rate of Depreciation=15%
PROFITABILITY STATEMENT
After 1st year Revenue Realization=256.38(calculated above)
Cost of production
=Cost of (Raw Materials & Consumables + Packing Material Consumed + Power &
Electricity)+Wages & Salaries + Repairs & Maintenance cost+ Selling, General &
Admin. Expenses+ Interest on Term Loan + Interest On Cash Credit Limit +
Depreciation)
= (199.50+6.68+14.14+6.90+0.00+5.13+6.53+3.51+9.450)
=251
Withdrawals = 0
Assets
Fixed Assets at WDV= (1000000+WDV of Shed & Building at year end+WDV of Plant
& Machinery at year end)/100000
= (1000000+1,350,000.00+4,505,000.00)/ 100000
=68.55 Lakhs
Total assets
=Sum of above all sets
= (68.55+9.98+6.13+21.36+2+1+13.41)
=122.43 Lakhs
Debt equity ratio is defined as the ratio of the money raised by the bank to the
money raised by the promoters. Benchmark for debt equity ratio is 2:1 .If this ratio is
less than 2, than it is considered profitable.
The break-even point (BEP) is the point at which cost or expenses and revenue are
equal: there is no net loss or gain, and one has "broken even". It is the capacity, below
which, if the production goes then we will incur loss.
BEP in kg
= (Fixed expenses)/Contribution per kg
= (17.90*100000)/13.61