I.

INTRODUCTION
The term Capital Budgeting refers to long term planning for proposed Capital outlays and
their financing. Thus it includes both rising of long term funds as well as their utilization.
It may this be defined as the firm's formal process for the acquisition and investment of
capital. It is the decision making process by which the firm evaluates the purchase of
maor fi!ed assets.
It involves firm's decision to invest it current funds for addition" disposition" modification
and replacement of long#term or fi!ed assets. however" it should be noted that
investment in current assets necessitated on account of investment in a fi!ed assets is as
to be taken as a capital budgeting decision.
Capital Budgeting is a many#sided activity it includes searching for new and more
profitable investment proposals" Investigating " $ngineering and %arketing
considerations to predict the consequences of accepting the investment and making
economic analysis to determine the profit potential of each investment proposal. Its basic
feature can be summarized as follows.
It has the potentiality of making large anticipated profits.
It involves high degree of risk.
It involve a relatively long#time period between the initial outlay and the anticipated
return.
&n the basis of the above discussion it can be concluded that Capital Budgeting consists
in planning the development of available capital for the purpose of ma!imizing the long
term profitability.
Capital Budgeting is investment decision making as to whether a proect is worth
undertaking. Capital Budgeting is basically concerned with the ustification of capital
e!penditures. Current e!penditures are short#term and are completely written off in the
same year the e!penses occur.
'
MEANING:
Capital Budging decision refers to assets that are in operations and yield a return over a
period of time" usually e!ceeding one year. It is a long term investment decision
involving huge capital e!penditures.
The main characteristics of a capital e!penditure are that the e!penditure is incurred at
one point of time where as benefits of the e!penditure are realized at different points of
time in future.
Capital Budgeting process involves planning" availability and controlling" allocation and
e!penditure of long term investment funds.
Cost of acquisition of permanent assets
THE FOLLOWING ARE SOME OF THE EXAMPLES OF CAPITAL
EXPENDITURE:
such as land and building plant and machinery" goodwill etc.
Cost of addition" e!pansion" improvement or alteration in the fi!ed assets.
Cost of replacement of permanent assets.
(esearch and development proect costs etc."
)
DEFINITION:
Capital Budgeting is the long term planning for making and financing proposed capital
outlays
#Charles T.*orngreen
Capita Budgeting is concerned with planning and development of available capital for the
purpose of ma!imizing the long term profitability of the concern.
#+ynch
Capital Budgeting involves a current investment in which the benefits are e!pected to be
received beyond one year in the future,. It suggests that the investment in any asset
with a file of less than a year falls into realm of working capital management" whereas
ably asset with a like more than one year involves capital budgeting.
#-ames C..an *orne.
Capital Budgeting involves the entire process of planning e!penditures whose returns are
e!pected to e!tend beyond one year.
# /estone and Brigham
0
1$$2 3&( T*$ 4T5267
Capital Budgeting are vital to an organization as they include the decisions as to7#
/hether funds should be invested in the long term proects such as setting of an Industry"
purchase of 8lant 9 %achinery etc.
To analyze the proposal for e!pansion or creating additional capacities.
To decide the replacement of permanent asset such as Building 9 $quipment.
To make financial analysis of various proposals regarding capital investment so as to
choose the best out of many alternative proposals.
*eavy investment in capital proects
+ong term implications for the firm
Irreversible decisions and
Complicated in the decision making.
:
REVIEW OF LITERATURE
Capital budgeting is the planning process used to determine a firm;s e!penditure on
assets whose cash flows are e!pected to e!tend beyond one year such as machinery"
equipments investments etc .It is the process of analyzing and selecting investment
proects whose cash flows are e!pected to e!tend beyond one year such as research
and development of the proect
MEANING:
The process through which different proects are evaluated is known as capital
budgeting
Capital budgeting is defined <as the firm;s formal process for the acquisition and
investment of capital. It involves firm;s decisions to invest its current funds for
addition" disposition" modification and replacement of fi!ed assets=.
<Capital budgeting is long term planning for making and financing proposed capital
outlays=# Charles T *orn green
<Capital budgeting consists in planning development of available capital for the
purpose of ma!imizing the long term profitability of the concern= > +ynch
The main features of capital budgeting are
a. 8otentially large anticipated benefits
b. ? relatively high degree of risk
c. (elatively long time period between the initial outlay and the anticipated return.
@
IMPORTANCE OF CAPITAL BUDGETING
Capital budgeting offers effective control on cost of capital e!penditure proects.
It helps the management to avoid over investment and under The success and
failure of business mainly depends on how the available resources are being
utilized.
%ain tool of financial management
?ll types of capital budgeting decisions are e!posed to risk and uncertainty.
They are irreversible in nature.
Capital rationing gives sufficient scope for the financial manager to evaluate
different proposals and only viable proect must be taken up for investments.
STEPS IN CAPITAL BUDGETING PROCESS
Capital budgeting process involves the following
1. Project e!er"t#o!: Aenerating the proposals for investment is the first step.
The investment proposal may fall into one of the following categories7
8roposals to add new product to the product line"
8roposals to e!pand production capacity in e!isting lines
It is proposals to reduce the costs of the output of the e!isting products without altering
the scale of operation.
4ales campaigning" trade fairs people in the industry" ( and 2 institutes" conferences
and seminars will offer wide variety of innovations on capital assets for investment.
$. Project E%"&'"t#o!: it involves two steps
$stimation of benefits and costs7 the benefits and costs are measured in terms of cash
flows. The estimation of the cash inflows and cash outflows mainly depends on future
B
uncertainties. The risk associated with each proect must be carefully analyzed and
sufficient provision must be made for covering the different types of risks.
4election of appropriate criteria to udge the desirability of the proect7 It must be
consistent with the firm;s obective of ma!imizing its market value. The technique of
time value of money may come as a handy tool in evaluation such proposals.
(. Project Se&ect#o!: 1o standard administrative procedure can be laid down for
approving the investment proposal. The screening and selection procedures are different
from firm to firm.
). Project E%"&'"t#o!: &nce the proposal for capital e!penditure is finalized" it is the
duty of the finance manager to e!plore the different alternatives available for acquiring
the funds. *e has to prepare capital budget. 4ufficient care must be taken to reduce the
average cost of funds. *e has to prepare periodical reports and must seek prior
permission from the top management. 4ystematic procedure should be developed to
review the performance of proects during their lifetime and after completion.
The follow up" comparison of actual performance with original estimates not only
ensures better forecasting but also helps in sharpening the techniques for improving
future forecasts.
F"ctor* #!+&'e!c#! c",#t"& -'.et#!
?vailability of funds
4tructure of capital
Ta!ation policy
Aovernment policy
+ending policies of financial institutions
Immediate need of the proect
C
$arnings
Capital return
$conomical value of the proect
/orking capital
T/e c&"**#+#c"t#o! o+ #!%e*t0e!t ,roject*
aD By proect size
4mall proects may be approved by departmental managers. %ore careful analysis
and Board of 2irectors' approval is needed for large proects of" say" half a million
dollars or more.
bD By type of benefit to the firm
?n increase in cash flow a decrease in risk an indirect benefit Eshowers for workers"
etcD.
cD By degree of dependence
%utually e!clusive proects Ecan e!ecute proect ? or B" but not bothD
complementary proects7 taking proect ? increases the cash flow of
proect substitute proects7 taking proect ? decreases the cash flow of proect B.
dD By degree of statistical dependence
8ositive dependence"
1egative dependence"
4tatistical independence.
F
T/e eco!o0#c e%"&'"t#o! o+ #!%e*t0e!t ,ro,o*"&*
The analysis stipulates a decision rule for7
ID ?ccepting
IID (eecting investment proects
THE TIME VALUE OF MONE1
(ecall that the interaction of lenders with borrowers sets an equilibrium rate of interest.
Borrowing is only worthwhile if the return on the loan e!ceeds the cost of the borrowed
funds. +ending is only worthwhile if the return is at least equal to that which can be
obtained from alternative opportunities in the same risk class.
The interest rate received by the lender is made up of7
i. The time value of money7 the receipt of money is preferred sooner rather than
later. %oney can be used to earn more money. The earlier the money is received"
the greater the potential for increasing wealth. Thus" to forego the use of money"
you must get some compensation.
ii. The risk of the capital sum not being repaid. This uncertainty requires a premium
as a hedge against the risk" hence the return must be commensurate with the risk
being undertaken.
iii. Inflation7 money may lose its purchasing power over time. The lender must be
compensated for the declining spending G purchasing power of money. If the
lender receives no compensation" heGshe will be worse off when the loan is repaid
than at the time of lending the money.
H
aD F't're %"&'e*2co0,o'!. #!tere*t
3uture value E3.D is the value in dollars at some point in the future of one or more
investments.
FV consists of7
iDThe original sum of money invested or
iiD The return in the form of interest.
The general formula for computing 3uture .alue is as follows7
FVn I Vo (l + rD
n
/here .o is the initial sum invested is the interest rate is the number of periods for which
the investment is to receive interest.
Thus we can compute the future value of what .o will accumulate to in n years when it is
compounded annually at the same rate of r by using the above formula.
PV I 3.nG(l + rD
n
'J
OB3ECTIVES OF THE STUD1:
To understand the need of organization" to identify and in high quality capital proects.
To analyze the e!pansion of business by increasing production and quality by acquiring
more fi!ed assets and the up to date machinery.
To evaluate the financial investments associated with the replacement of e!isting assets
soar the purchase of new assets.
Budget serve has a ''Blue print'' of the desired plan of action.
Budget helps in reduction of wastage and losses by revealing them in time for corrective
action.
Budget serves as the benchmark for the controlling on going operation.
Budgeting facilitate centralized control with delegated authority and respectability.
SCOPE OF THE STUD1
The study is confined to *$(IT?A$ 3&&24 I12I? +I%IT$2 and analysis of
its financial statements.
The main aim of the study is to assess the proper management of current assets
9current liabilities.
The study concentrates more on the capital budgeting of the <*$(IT?A$
3&&24 I12I? +I%IT$2=
Capital budgeting give only a good basis of quantitative analysis of financial
problem.

''
LIMITATIONS OF THE STUD1
The period of the study is limited.
3inancial matters are sensitive in nature" the same could not acquire easily.
It may be due to restrictions imposed by management.
The sources of data are based on cash flows.
The study was conducted with the data available and analysis was made
accordingly.
2ue to the confidential matters of financial records" the data is not e!posed so the
study may not be detailed and full fledged.
4ince the study is based on the financial data that are obtained from the
company's financial statements" the limitations of financial statements shall be
equally applicable.
2ata is collected for five proects which is limited.
The study is confined to secondary data source and figures are taken from reports
and suggestions of various accountants.
')
RESEARCH METHODOLOG1
(esearch methodology implies a systematic attempt by the researcher to obtain
knowledge about subect understudy. This is systematic way to show the problem and it is
important components of the study without which a research may not able obtain the facts
and figures from employees.
The primary data needed for the proect analysis has been collected through unstructured
interviews and discussions conducted with the finance department. The secondary
sources of data are annual reports" brochures" news papers and web sources
DATA BASE
This study will be based on both primary and secondary data.
PRIMAR1 DATA
The data is collected directly from the organization people. It is an important data related
to financial aspects of the company.
It is in the form of questionnaires" interviews and discussions with employees.
PRIMAR1 DATA
Interaction with the planning and development department employees.
Interaction with finance employees.
SECONDAR1 DATA
2ata which are not originally collected but rather obtained published or unpublished
sources are known as secondary data.
5npublished sources like magazines past research" reports company manuals and its
reports for the year
The collected data is presented in table format. Investment decisions play a dominant role
in setting the fame work for managerial decisions.
'0
SECONDAR1 DATA
Capital budgeting manual of *?$(IT?A$
?ccounting manuals of *?$(IT?A$
Broachers
*ouse magazines of unit
1ews of papers
SIGNIFICANCE OF CAPITAL BUDGETING:
The need of capital budgeting can be emphasised taking into consideration the very
nature of the capital e!penditure such as heavy investment in capital proects" long#term
implications for the firm" irreversible decisions and complicates of the decision making.
Its importance can be illustrated well on the following other grounds7#
'D I!.#rect Forec"*t o+ S"&e*. The investment in fi!ed assets is related to future
sales of the firm during the life time of the assets purchased. It shows the
possibility of e!panding the production facilities to cover additional sales shown
in the sales budget. ?ny failure to make the sales forecast accurately would result
in over investment or under investment in fi!ed assets and any erroneous forecast
of asset needs may lead the firm to serious economic results.
)D Co0,"r"t#%e St'.4 o+ A&ter!"t#%e Project* Capital budgeting makes a
comparative study of the alternative proects for the replacement of assets which
are wearing out or are in danger of becoming obsolete so as to make the best
possible investment in the replacement of assets. 3or this purpose" the profitability
of each proect is estimated.
':
0D T#0#! o+ A**et*5Ac6'#*#t#o!. 8roper capital budgeting leads to proper timing of
assets#acquisition and improvement in quality of assets purchased. It is due to ht
nature of demand and supply of capital goods. The demand of capital goods does
not arise until sales impinge on productive capacity and such situation occurs only
intermittently. &n the other hand" supply of capital goods with their availability is
one of the functions of capital budgeting.
:D C"*/ Forec"*t. Capital investment requires substantial funds which can only be
arranged by making determined efforts to ensure their availability at the right
time. Thus it facilitates cash forecast.
@D Wort/5M"7#0#8"t#o! o+ S/"re/o&.er*. The impact of long#term capital
investment decisions is far reaching. It protects the interests of the shareholders
and of the enterprise because it avoids over#investment and under#investment in
fi!ed assets. By selecting the most profitable proects" the management facilitates
the wealth ma!imization of equity share#holders.
BD Ot/er F"ctor*. The following other factors can also be considered for its
significance7
aD It assists in formulating a sound depreciation and assets replacement policy.
bD It may be useful n considering methods of coast reduction. ? reduction campaign
may necessitate the consideration of purchasing most up#toKdate and modern
equipment.
cD The feasibility of replacing manual work by machinery may be seen from the
capital forecast be comparing the manual cost an the capital cost.
dD The capital cost of improving working conditions or safety can be obtained
through capital e!penditure forecasting.
eD It facilitates the management in making of the long#term plans an assists in the
formulation of general policy.
fD It studies the impact of capital investment on the revenue e!penditure of the firm
such as depreciation" insure and there fi!ed assets.
'@
The question arises why capital budgeting decisions are criticalL The foremost
importance is that the capital is a limited resource which is true of any form of capital"
whether it is raised through debt or equity. The firms always face the constraint of capital
rationing. This may result in the selection of less profitable investment proposals if the
budget allocation and utilization is the primary consideration. 4o the management should
make a careful decision whether a particular proect is economically acceptable and
within the specified limits of the investments to be made during a specified period of
time. In the case of more than one proect" management must identify the combination of
investment proects that will contribute to the value of the firm and profitability. This" in
essence" is the basis of capital budgeting.
Fo&&o9#! "re t/e c",#t"& -'.et#! tec/!#6'e*:
A. Tr".#t#o!"& 0et/o.*
'D 8ayback period
)D ?ccounting rate of return method
B. D#*co'!te. c"*/ +&o9 0et/o.*
'D 1et present value method
)D 8rofitability inde! method
0D Internal rate of return
PA1 BAC: PERIOD METHOD
It refers to the period in which the proect will generate the necessary cash to recover the
initial investment.
It does not take the effect of time value of money.
It emphasizes more on annual cash inflows" economic life of the proect and original
investment.
The selection of the proect is based on the earning capacity of a proect.
'B
It involves simple calculation" selection or reection of the proect can be made easily"
results obtained are more reliable" best method for evaluating high risk proects.
PA1 BAC: PERIOD ; BASED PERIOD < INVESTMENT = CCFAT
555555555555555555555555555555555
NEXT CCFAT
ACCOUNTING RATE OF RETURN METHOD
IT considers the earnings of the proect of the economic life. This method is based on
conventional accounting concepts. The rate of return is e!pressed as percentage of the
earnings of the investment in a particular proect. This method has been introduced to
overcome the disadvantage of pay back period. The profit under this method is
calculated as profit after depreciation and ta! of the entire life of the proect.
This method of ?(( is not commonly accepted in assessing the profitability of capital
e!penditure. Because the method does to consider the heavy cash inflow during the
proect period as the earnings with be averaged. The cash flow advantage derived by
adopting different kinds of depreciation is also not considered in this method.
The annual rate of return uses accrual#based net income to calculate a proect's e!pected
profitability. The annual rate of return is compared to the company's required rate of return.
If the annual rate of return is greater than the required rate of return" the proect may be
accepted. The higher the rate of return" the higher the proect would be ranked.
The annual rate of return is a percentage calculated by dividing the e!pected annual net
income by the average investment. ?verage investment is usually calculated by adding the
beginning and ending proect book values and dividing by two
Acce,t or Reject Cr#ter#o!7
'C
5nder the method" all proect" having ?ccounting (ate of return higher than the
minimum rate establishment by management will be considered and those having ?((
less than the pre#determined rate.
This method ranks a 8roect as number one" if it has highest ?((" and lowest rank is
assigned to the proect with the lowest ?((.
RETURN ON INVESTMENT ; AVERAGE CASH INFLOW
5555555555555555555555555555555555 > 1??
AVERAGE INVESTMENT
DISCOUNTED CASH FLOW METHOD
Time adusted technique is an improvement over pay back method and ?((. ?n
investment is essentially out flow of funds aiming at fair percentage of return in future.
The presence of time as a factor in investment is fundamental for the purpose of
evaluating investment. Time is a crucial factor" because" the real value of money
fluctuates over a period of time. ? rupee received today has more value than a rupee
received tomorrow. In evaluating investment proects it is important to consider the
timing of returns on investment. 2iscounted cash flow technique takes into account both
the interest factor and the return after the payback period.
2iscounted cash flow technique involves the following steps7
Calculation of cash inflow and out flows over the entire life of the asset.
2iscounting the cash flows by a discount factor
'F
?ggregating the discounted cash inflows and comparing the total so obtained
with the discounted out flows.
NET PRESENT VALUE METHOD
It recognizes the impact of time value of money. It is considered as the best method of
evaluating the capital investment proposal.
Considering the time value of money is important when evaluating proects with different
costs" different cash flows" and different service lives. 2iscounted cash flow techniques"
such as the net present value method" consider the timing and amount of cash flows. To
use the net present value method" you will need to know the cash inflows" the cash
outflows" and the company's required rate of return on its investments. The required rate
of return becomes the discount rate used in the net present value calculation. 3or the
following e!amples" it is assumed that cash flows are received at the end of the period.
The 1et 8resent .alue technique involves discounting net cash flows for a proect" then
subtracting net investment from the discounted net cash flows. The result is called the 1et
8resent .alueE18.D. If the net present value is positive" adopting the proect would add
to the value of the company. /hether the company chooses to do that will depend on
their selection strategies. If they pick all proects that add to the value of the company
they would choose all proects with positive net present values" even if that value is ust
M'. &n the other hand" if they have limited resources" they will rank the proects and pick
those with the highest 18.'s.
Acce,t or Reject Cr#ter#":
'. 3or a single proect" take it if and only if its 18. is positive.
). 3or many independent proects" take all those with positive 18..
0. 3or mutually e!clusive proects" take the one with positive and highest 18..
It is widely used in practice. The cash inflow to be received at different period of time
will be discounted at a particular discount rate. The present values of the cash inflow are
compared with the original investment. The difference between the two will be used for
'H
accept or reect criteria. If the different yields END positive value" the proposal is selected
for investment. If the difference shows E#D negative values" it will be reected.
NPV;@ CF!2A& <:B
! 5
Co
C3nI Cash flows for each year
CoIinitial investment
OI2iscount rate
nI life of the proect
INTERNAL RATE OF RETURN
It is that rate at which the sum of discounted cash inflows equals the sum of discounted
cash outflows. It is the rate at which the net present value of the investment is zero.
It is the rate of discount which reduces the 18. of an investment to zero. It is called
internal rate because it depends mainly on the outlay and proceeds associated with the
proect and not on any rate determined outside the investment.
ACCEPT OR RE3ECT CRITERION
3or independent proects7 ?ccept a proect if its I(( is greater
than some fi!ed IRR" the threshold rate.
3or mutually e!clusive proects7 ?mong the proects having
I((;s greater than IRR" accept one with the highest I((
)J
IRR ; LOWER RATE < I!+&o9* "t &o9er r"te5 #!%e*t0e!t
55555555555555555555555555555555555555555555555555555
I!+&o9* "t &o9er r"te = #!+&o9 "t /#/er r"te
PROFITABILIT1 INDEX
The payback measures the length of time it takes a company to recover in cash its initial
investment. This concept can also be e!plained as the length of time it takes the proect to
generate cash equal to the investment and pay the company back. It is calculated by
dividing the capital investment by the net annual cash flow. If the net annual cash flow is
not e!pected to be the same" the average of the net annual cash flows may be used.
PROFITABILIT1 INDEX ;CF!2

Co
C3nI Total Cash flows
CoIInitial investment
ACCEPT OR RE3ECT CRITE
3or independent proects7 ?ccept all proects with 8I greater than one Ethis is
identical to the 18. ruleD
3or mutually e!clusive proects7 ?mong the proects with 8I greater than one"
accept the one with the highest 8I.
)'
II. COMPAN1 PROFILE
Her#t"e "t " G&"!ce:
The *eritage Aroup" founded in 'HH) by 4ri 1ara Chandra Babu 1aidu" is
one of the fastest growing 8rivate 4ector $nterprises in India" with three#business
divisions viz." 2airy" (etail and ?gri under its flagship Company *eritage 3oods EIndiaD
+imited E*3I+D" one infrastructure subsidiary # *eritage Infra 2evelopers +imited and
other associate Companies viz." *eritage 3inlease +imited" *eritage International
+imited and *eritage ?gro %erine 8rivate +imited. The annual turnover of *eritage
3oods crossed (s.0:C crores in )JJB#JC and is aiming for (s.CJJ crores during )JJC#JF.
8resently *eritage;s milk products have market presence in ?ndhra
8radesh" Oarnataka" Oerala" Tamil 1adu and %aharashtra and its retail stores across
Bangalore" Chennai and *yderabad. Integrated agri operations are in Chittoor and %edak
2istricts and these are backbone to retail operations.
In the year 'HH:" *3I+ went to 8ublic Issue to raise resources" which was
oversubscribed @: times and its shares are listed under B' Category on B4$ E4tock Code7
@'H@@)D and 14$ E4tock Code7 *$(ITA3&&2D
?bout the founder7
))
4ri Chandra Babu 1aidu is one of the greatest 2ynamic" 8ragmatic"
8rogressive and .isionary +eaders of the )'
st
Century. /ith an obective of bringing
prosperity in to the rural families through co#operative efforts" he along with his relatives"
friends and associates promoted *eritage 3oods in the year 'HH) taking opportunity from
the Industrial 8olicy" 'HH' of the Aovernment of India and he has been successful in his
endeavour.
?t present" *eritage has market presence in all the states of 4outh India.
%ore than three thousand villages and five lakh farmers are being benefited in these
states. &n the other side" *eritage is serving more than B lakh customers needs"
employing more than CJJ employees and generating indirectly employment opportunity
to more than @JJJ people. Beginning with a humble annual turnover of ust (s.:.0F
crores in 'HH0#H:" the sales turnover has reached close to (s.0JJ crores during the
financial year )JJ@#)JJB.
4ri 1aidu held various coveted and honorable positions including Chief
%inister of ?ndhra 8radesh" %inister for 3inance 9 (evenue" %inister for ?rchives 9
Cinematography" %ember of the ?.8. +egislative ?ssembly" 2irector of ?.8. 4mall
Industries 2evelopment Corporation" and Chairman of Oarshaka 8arishad.
4ri 1aidu has won numerous awards including P %ember of the /orld
$conomic 3orum's 2ream CabinetP ETime ?sia D" P4outh ?sian of the 6ear P ETime
?sia D" P Business 8erson of the 6ear P E$conomic TimesD" and P IT Indian of the
%illennium P E India TodayD.
4ri 1aidu was chosen as one of @J leaders at the forefront of change in the
year )JJJ by the Business /eek magazine for being an unflinching proponent of
technology and for his drive to transform the 4tate of ?ndhra 8radesh .
For9"r. &ooC#! *t"te0e!t*:
)0
</e have grown" and intended to grow" focusing on harnessing our
willingness to e!periment and innovate our ability to transform our drive towards
e!cellence in quality" our people first attitude and our strategic direction.
M#**#o!:
Bringing prosperity into rural families of India through co#operative
efforts and providing customers with hygienic" affordable and convenient supply of P
3resh and *ealthy P food products.
V#*#o!:
To be a progressive billion dollar organization with a pan India foot print
by )J').To achieve this by delighting customers with P3resh and *ealthyP food products"
those are a benchmark for quality in the industry.
/e are committed to enhanced prosperity and the emfoodment of the
farming community through our unique P(elationship 3armingP %odel.
To be a preferred employer by nurturing entrepreneurship" managing
career aspirations and providing innovative avenues for enhanced employee prosperity.
Her#t"e S&o"!:
/hen you are healthy" we are healthy
/hen you are happy" we are happy
/e live for your P*$?+T* 9 *?88I1$44P
D'"&#t4 ,o&#c4 o+ HFIL:
):
/e are committed to achieve customer satisfaction through hygienically
processed and packed %ilk and %ilk 8roducts. /e strive to continually improve the
quality of our products and services through upgradation of technologies and systems.
*eritage's soul has always been imbibed with an unwritten perpetual commitment
to itself" to always produce and provide quality products with continuous efforts to
improve the process and environment.
?dhering to its moral commitment and its continuous drive to achieve
e!cellence in quality of %ilk" %ilk products 9 4ystems" *eritage has always been laying
emphasis on not only reviewing 9 re#defining quality standards" but also in
implementing them successfully. ?ll activities of 8rocessing" Quality control" 8urchase"
4tores" %arketing and Training have been documented with detailed quality plans in each
of the departments.
Today *eritage feels that the I4& certificate is not only an epitome of
achieved targets" but also a scale to identify 9 reckon" what is yet to be achieved on a
continuous basis. Though" it is a beginning" *eritage has initiated the process of
standardizing and adopting similar quality systems at most of its other plants.
Co00#t0e!t*:
M#&C Pro.'cer*:
Change in styles of rural families in terms of7
(egular high income through co#operative efforts.
/omen participation in income generation .
4aved from price e!ploitation by un#organized sector .
(emunerative prices for milk .
Increase of milk productivity through input and e!tension activities
)@
4hift from risky agriculture to dairy farming
*eritage
3inancial support for purchase of cattleR insuring cattle
$stablishment of Cattle *ealth Care Centers
4upplying high quality Cattle feed
&rganizing P(ythu 4adasuP and .ideo programmes for educating the farmers in
dairy farming
C'*to0er*:
Timely 4upply of Quality 9 *ealthy 8roducts
4upply high quality milk and milk products at affordable prices
3ocused on 1utritional 3oods
%ore than : lakh happy customers
*igh customer satisfaction
): hours help lines E S'J complaints a dayD
E0,&o4ee*:
$nhancing the Technical and %anagerial skills of $mployees through continuous
training and development
Best appraisal systems to motivate employees
Incentive" bonus and reward systems to encourage employees
)B
*eritage forges ahead with a motto Padd value to everything you doP
Ret'r!*:
Consistent 2ividend 8ayment since 8ublic Issue E-anuary 'HH@D
Ser%#ce:
*ighest impotence to investor serviceR no notice from any regulatory authority
since )JJ' in respect of investor service
.ery transparent disclosures
S',,&#er*:
Doe/&"r: technical collaboration in %ilk drinks" yogurts drinks and fruit
flavoured drinks ?lfa#+aval7 supplier of high#end machinery and technical support
3ocusing on Tetra pack association for products package.
Soc#et4:
8otential $mployment Aeneration
more than 0@JJ employees are working with heritage
more than H@JJ procurement agents got self employment in rural areas
more than @JJJ sales agents associated with the company
$mployment for the youth by providing financial and animal husbandry support
for establishing %I1I 2?I(I$4
8roducing highly health conscious products for the society
D'"&#t#e* o+ 0"!"e0e!t ,r#!c#,&e*:
)C
'. Customer focus to understand and meet the changing needs and e!pectations of
customers.
). 8eople involvement to promote team work and tap the potential of people.
0. +eadership to set constancy of purpose and promote quality culture trough out the
organization.
:. 8rocess approach to assess the efficiency and effectiveness of each process.
@. 4ystems approach to understand the sequence and interaction of process.
B. 3actual approach to decision making to ensure its accuracy.
C. Continual improvement processes for improved business results.
F. 2evelopment of suppliers to get right product and services in right time at right
place.
Pro.'ct2M"rCet 9#*e ,er+or0"!ce:
The total turnover is (s 0:' Crores during the financial year )JJB#JC
against the turnover of )H).J) Crores in )JJ@#JB. Today *eritage distributes quality milk
9 milk products in the states of ?.8" Oarnataka" Oerala 9 Tamil nadu.
2uring the year )JJB#JC liquid milk sales was (s.)F0)H.CH lakhs against
(s.):@)@.)0 lakhs in the previous year. The sales of miik products including bulk sales of
cream" ghee and butter were recorded (s @CF'.@H lakhs against (s :BCC.)' lakhs.
M#&C *"&e*:
)0T growth was recorded in ?8 ).0F lakhs litres per dayE++82D in )JJB#JC
against '.H0 ++82 in )JJ@#JB. '0T growth was recorded in Tamilnadu#'.@0 ++82 in
)JJB#JC against '.0@ ++82 in )JJ@#JB. &ver all growth of BT was recorded# @.:H ++82
)F
in )JJB#JC against @.'B ++82. 3lavoured milk sales recorded a growth rate of CCT over
)JJ@#JB. Butter milk sales have gone up by :@T over )JJ@#JB.
O't&ooC:
Considering the growth potential in the liquid milk market" the company
has drawn plans to increase its market share in the e!isting markets and to enter into new
markets there by doubling revenues in dairy business in the ne!t 0 years. To achieve this
obect" company is undertaking maor e!pansion in dairy business by inverting over (s)J
crores during )JJB#JC and over (s'J crores during the current year to strengthen the milk
procurement.
BRANCHES OF HFIL:
*3I+ has 0 wings. They are
'. 2airy
). (etail
0. ?gribusiness
1. D"#r4:
It is the maor wing among all. The dairy products manufactured by *3I+ are
%ilk" curd" butter" ghee" flavoured milk" paneer" doodhpeda" ice cream.
)H
$. Ret"#&:
In the retail sector *3I+ has outlets namely <3resh,=. In those stores the
products sold are vegetables" milk9 milk products" grocery" pulses" fruits etc.
In *yderabad 'H retail shops are there. In Bangalore9 Chennai" 09:
respectively are there. Totally there are )B retail shops are there.
3resh, is a unique chain of retail stores" designed to meet the needs of the
modern Indian consumer. The store rediscovers the taste of nature every day making
grocery shopping a never before e!perience.
The unique9 distinctive feature of 3resh, is that it offers the widest
range of fresh fruits and vegetables which are directly hand picked from the farms.
3reshness lies in their merchandise and the customers are always welcomed with fresh
fruits and vegetables no matter what what time they walk in.
(. Ar# B'*#!e**:
0J
In this business *3I+ employees will go to farmers and have a deal with
them. Those farmers will sell their goods like vegetables" pulses to *3I+ only. ?nd *3I+
will transport the goods to retail outlets.
The agricultural professors will e!amine which area is suitable to import
vegetables from and also e!amine the vegetables" pulses and fruits in the lab. ?nd finally
they report to the *ead#?gribusiness. (epresentatives as per the instructions given by the
agri professors will approach the farmers directly and make a deal with them. It is the
process of registering the farmers.
). INDUSTR1 PROFILE
India is the world's second largest producer of food ne!t to China" and has the potential of
being the biggest with the food and agricultural sector. The total food production in India is
likely to double in the ne!t ten years and there is an opportunity for large investments in
food and food processing technologies" skills and equipment" especially in areas of Canning"
2airy and 3ood 8rocessing" 4pecialty 8rocessing" 8ackaging" 3rozen 3oodG(efrigeration
and Thermo 8rocessing. 3ruits 9 .egetables" 3isheries" %ilk 9 %ilk 8roducts" %eat 9
8oultry" 8ackagedGConvenience 3oods.
India is one of the worlds maor food producers but accounts for less than '.@ per cent of
international food trade. This indicates vast scope for both investors and e!porters. 3ood
e!ports in 'HHF stood at 54 M@.F billion whereas the world total was 54 M:0F billion. The
Indian food industries sales turnover is (s ':J"JJJ crore E' crore I 'J millionD annually as
at the start of year )JJJ.
India's food processing sector covers fruit and vegetablesR meat and poultryR milk and milk
products" alcoholic beverages" fisheries" plantation" grain processing and other consumer
product groups like confectionery" chocolates and cocoa products" 4oya#based products"
mineral water" high protein foods etc. /e cover an e!haustive database of an array of
suppliers" manufacturers" e!porters and importers widely dealing in sectors like the #3ood
Industry.
The most promising sub#sectors includes #4oft#drink bottling" Confectionery manufacture"
0'
3ishing" aquaculture" Arain#milling and grain#based products" %eat and poultry processing"
?lcoholic beverages" %ilk processing" Tomato paste" 3ast#food" (eady#to#eat breakfast
cereals" 3ood additives" flavors etc.
The food industry is the comple!" global collective of diverse businessesthat together
supply much of the food energy consumed by the world population. &nly subsistence
farmers" those who survive on what they grow" can be considered outside of the scope of
the modern food industry.
The food industry includes7
(egulation7 local" regional" national and international rules and regulations for
food production and sale" including U food quality and food safety" and industry
lobbying activities $ducation7 academic" vocational" consultancy
(esearch and development7 food technology
3inancial services" credit %anufacturing7 agrichemicals" seed" farm machinery
and supplies" agricultural construction" etc.
?griculture7 raising of crops and livestock" seafood 3ood processing7
preparation of fresh products for market" manufacture of prepared food products
%arketing7 promotion of generic products Ee.g. milk boardD" new products" public
opinion" through advertising" packaging" public relations " etc
/holesaleanddistribution7 warehousing" transportation" logistics
(etail7 supermarket chains and independent food stores" direct#to#consumer"
restaurant " food services
Consumer7 $nd user has one of the highest influences on the food industry
through things like preference
0)
The $conomic (esearch 4ervice of the 542? uses the term food system to describe the
same thing7
PThe 5.4. food system is a comple! network of farmers and the industries that link to
them. Those links include makers of farm equipment and chemicals as well as firms
that provide services to agribusinesses" such as providers of transportation and
financial services. The system also includes the food marketing industries that link
farms to consumers" and which include food and fiber processors" wholesalers"
retailers" and foodservice establishments.P
H#*tor4
3ood processing dates back to the prehistoric ages when crude processing incorporated
slaughtering" fermenting" sun drying" preserving withsalt" and various types of cooking
Esuch as roasting" smoking" steaming" and oven bakingD. 4alt#preservation was especially
common for foods that constituted warrior and sailors' diets" up until the introduction of
canning methods. $vidence for the e!istence of these methods e!ists in the writings of
the ancient Areek " Chaldean" $gyptian and (omancivilizations as well as archaeological
evidence from $urope" 1orth and 4outh ?merica and ?sia. These tried and tested
processing techniques remained essentially the same until the advent of the industrial
revolution. $!amples of ready#meals also e!ist from pre industrial revolution times such
as the Cornish pasty and the *aggis %odern food processing technology in the 'Hth and
)Jth century was largely developed to serve military needs. In 'FJH1icolas ?ppert
invented a vacuumbottling technique that would supply food for 3rench troops" and this
contributed to the development of tinning and then canning by 8eter 2urand in 'F'J.
?lthough initially e!pensive and somewhat hazardous due to the lead used in cans"
canned goods would later become a staple around the world 8asteurization. discovered by
+ouis 8asturing 'FB)" was a significant advance in ensuring the micro#biological safety
of food.
In the )Jth century" /orld /ar II" the space race and the rising consumer society
in developed countries Eincluding the 5nited 4tatesD contributed to the growth of food
00
benzoate processing with such advances asspray drying" uice concentrates" freeze
dryingand the introduction of artificial sweeteners" colouring agents" and preservatives
such as sodium . In the late )Jth century products such as dried instant soups"
reconstituted fruits and uices" and self cooking meals such as%($ food ration were
developed.
In western $urope and 1orth ?merica" the second half of the )Jth century witnessed a
rise in the pursuit of convenience" food processors especially marketed their products to
middle#class working wives and mothers. 3rozen foods Eoften credited to Clarence
BirdseyeD found their success in sales of uice concentrates and PT. dinnersP. 8rocessors
utilised the perceived value of time to appeal to the postwar population" and this same
appeal contributes to the success of convenience foodstoday.
The Indian packaged processed foods industry is estimated at 54M 'J.FC billion > 54M
'0.J@ billion" including biscuits" chocolates" ice#cream" confectionery" snacks" cheese and
butter. Arowing at a healthy ':#'@ per cent over the past two#three years" maor players
in the sector include Britannia" 1estle" ?mul" ITC 3oods" 8arle" Oellogg;s"
Ala!o4mithOline" /rigley and 3rito#+ay" among others.
The industry received foreign direct investments E32ID totalling 54M ':0.FJ million in
)JJC#JF against 54M @.CJ million in the previous fiscal. The cumulative 32I received by
the industry from ?pril )JJJ#?ugust )JJH stood at 54M FCF.0) million.
*owever" India;s share in e!ports of processed food in global trade is only '.@ per centR
whereas the size of the global processed#food market is estimated at 54M 0.) trillion and
nearly FJ per cent of agricultural products in the developed countries get processed and
packaged.
In order to further grow the food processing industry" the government has
formulated a .ision#)J'@ action plan under which specific targets have been set. This
includes tripling the size of the food processing industry from around 54M CJ billion to
about 54M )'J billion" raising the level of processing of perishables from B per cent to )J
per cent" increasing value addition from )J per cent to 0@ per cent" and enhancing India;s
0:
share in global food trade from '.@ per cent to 0 per cent. This would require an
investment of 54M )J.B billion.
?ccording to an $rnst and 6oung E$96D presentation" the food processing industry in
India will grow 0J#:J per cent as against the present '@ per cent in the ne!t 'J#years.
8rime %inister 2r %anmohan 4ingh on &ctober B" )JJH laid out a blueprint for rapid
growth in the country;s food processing sector. The 8rime %inister said that this can be
achieved by simplifying the ta! structure" formulating a 1ational 3ood 8rocessing 8olicy
and improving rural infrastructure.
%oreover" according to 5nion %inister for 3ood 8rocessing Industries" 4ubodh Oant
4ahai the central government is envisaging an investment of 54M )'.@J billion in the
food processing industry over the ne!t five years" a maor chunk of which it plans to
attract from the private sector and financial institutions.
III. DATA ANAL1SIS AND INTERPRETATION
0@
T?B+$ 1&.0.J'
PRO3ECT PRO3ECT
1
PRO3ECT
$
PRO3ECT
(
PRO3ECT
)
PRO3ECT
E
COST OF
INVESTMENT @')@ 'J)@J :')@ F')@ 'H)J
1EAR2
PBDT
1 $ ( ) E F G H I 1? TOT
AL
8(&-$C
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INTERPRITATION:
2epreciation as per the profit and loss account '@T 4+%
2epreciation as per the income ta! act 0@T '@T w.d.v
6ear ' 6ear ) onwards
Ta! rate 00T
8resent value factor '0T
Calculate 18."I(("8I"(&I.8B8
8(&-$CT '7 E$4TI%?T$ B52A$T (4 @')@ +?O*4D
0B
6$?( 8B2T +$44
2$8($
CI?TI&1
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2$8($
CI?TI&1
C3?T CC3?T
' 'J)J 'CH: #CC: #))@ #@'H 'CH: ')C@ ')C@
) '@)J @JJ 'J)J 00C BF0 @JJ ''F0 ):@F
0 '@)J :)@ 'JH@ 0B' C0: :)@ ''@H 0B'C
: 'B)J 0B' ')@H :'@ F:: 0B' ')J@ :F))
@ 'C)J 0JC ':'0 :BB H:C 0JC ')@: BJCB
B '@)J )B' ')@H :'@ F:: )B' ''J@ C'F'
C 'B@J ))) ':)F :C' H@C ))) ''CH F0BJ
F '@)J 'FF '00) ::J FH) 'FF 'JFJ H::J
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T&T?
+
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0C
8resent value cash inflow IB)C:
8resent value cash outflowI@')@
1$T 8($4$1T .?+5$ %$T*&2
1et present value I cash inflow > cash outflow
B)C: > @')@
18. , '0T I'':H
8(&3IT?BI+IT6 I12$V
8.I I Total present value of cash inflow G total investment
0F
6$?(4 C3?T 8.,'0T T&T?+ 8. 8.,)JT T&T?+
8.
CC3?T
' ')C@ .FF:HB '')F .F0000 'JB) ')C@
) ''F0 .CF0'@ H)B .BH::: F)) ):@F
0 ''@H .BH0J@ FJ0 .@CFCJ BC' 0B'C
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B ''J@ .:FJ0) @0' .00:HJ 0CJ C'F'
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'J H)0 .)H:@H )C) .'B'@' ':H ''))B
T&T?+ B)C: :@B:
IB)C: G @')@
I'.)) Times
I1T$(1?+ (?T$ &3 ($T5(1
I(( I +&/$( (?T$ N Inflows at lower rate# investment
#####################################################
Inflows at lower rate > inflow at higher rate
I '0 N B)C: > @')@
#####################
B)C: > :@B:
I '0 N :.C
I'C.CT &( 'FT
8?6 B?CO 8$(I&2
8ay back period I based period N investment > CC3?T
############################
1e!t CC3?T
I : N 0J0
######
')@:
I : N .)
I :.) %onths
($T5(1 &1 I1.$4T%$1T
(eturn on investment I ?verage cash inflow W 'JJ
0H
##################################
?verage investment
?verage cash inflow I ''))BG'J I '')).B
?verage investment I @')@G ) I )@)B.@
(&I I '')).HG)@)B.@ W 'JJ
I :0.FT &( ::T
T?B+$ 1&.0.J)
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:J
6$?( 8B2T +$44
2$8($
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?4 8$(
T?V
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2$8($
CI?TI&1
C3?T CC3?T
' 0JBJ 0@FF #@)F #'C: #0@: 0@FF 0)0: 0)0:
) :@BJ HHH 0@B' ''C: )0FB HHH 00F@ BB'H
0 :@BJ F:H 0C'' '))@ ):FB F:F 000@ HH@:
: :FBJ C)) :'0F '0BB )CC) C)) 0:H: '0::F
@ @'BJ B': :@:B '@JJ 0J:B B': 0BBJ 'C'JF
B :@BJ @)) :J0F '000 )CJ@ @)) 0))C )J00@
C :H@J ::0 :@JC ':FC 0J)J ::0 0:B0 )0CHF
F :@BJ 0CC :'F0 '0FJ )FJ0 0CC 0'FJ )BHCF
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:'
INTERPRITATION:
8resent value cash inflow I'CF'H
8resent value cash outflowI'J)@J
1$T 8($4$1T .?+5$ %$T*&2
1et present value I cash inflow > cash outflow
I 'CF'H # 'J)@J
18. , '0T IC@BH
8(&3IT?BI+IT6 I12$V
8.I I Total present value of cash inflow G total investment
I'CF'HG'J)@J
:)
6$?(4 C3?T 8.,'0T T&T?+ 8. 8.,)JT T&T?+
8.
CC3?T
' 0)0: .FF:HB )FB) .CFC:J )@:B 0)0:
) 00F@ .CF0'@ )B@' .B)JJJ )JHH BB'H
0 000@ .BH0J@ )0'' .:FF'J 'B)F HH@:
: 0:H: .B'00) )':0 .0F::J '0:0 '0::F
@ 0BBJ .@:)CB 'HFC .0J)BF ''JF 'C'JF
B 0))C .:FJ0) '@@J .):HH' FJB )J00@
C 0:B0 .:)@JB ':C) .'HF0: BFC )0CHF
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H )@0F .00)FF F:) .'):H0 0'C )H@'B
'J )C)0 .)H:@H FJ) .JHH'@ )CJ 0))0H
T&T?+ 0))0H 'CF'H ''0J@
I'.C: Times
I1T$(1?+ (?T$ &3 ($T5(1
I(( I +&/$( (?T$ N inflows at lower rate# investment
####################################################
inflows at lower rate > inflow at higher rate
I '0 N 'CF'H # 'J)@J
#####################
B)C: > :@B:
I '0 N '@.'
I)FT
8?6 B?CO 8$(I&2
8ay back period I based period N investment > CC3?T
############################
1e!t CC3?T
I 0 N )HB
######
0:H:
I 0 N .JF
I 0.' %onths
($T5(1 &1 I1.$4T%$1T
(eturn on investment I ?verage cash inflow W 'JJ
#################################
?verage investment
:0
?verage cash inflow I 0))0HG'J I 0))0.H
?verage investment I 'J)@JG ) I @')@
(&I I 0))0..HG@')@ W 'JJ
I B).HT &( B0T
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::
6$?( 8B2T +$44
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:@
INTERPRITATION:
8resent value cash inflow I)0H'
8resent value cash outflowI:')@
1$T 8($4$1T .?+5$ %$T*&2
1et present value I cash inflow > cash outflow

I)0H' # :')@
18. , '0T I # 'C0:
8(&3IT?BI+IT6 I12$V
8.I I Total present value of cash inflow G total investment
:B
6$?(4 C3?T 8.,'0T T&T?+ 8. 8.,)JT T&T?+
8.
CC3?T
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) :0F .CF0'@ 0:0 .F)B@: 0B) '')J
0 :'F .BH0J@ )HJ .C@'0' 0': '@0F
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@ :)C .@:)CB )0) .B)JH) )B@ )0FC
B 0C@ .:FJ0) 'FJ .@B::C )') )CB)
C 0HJ .:)@JB 'BB .@'0B' )JJ 0'@)
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'J 0JJ .)H:@H FF .0@JJH 'J@ :JH:
T&T?+ :JH: )0H' )B@0
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I.@F Times
I1T$(1?+ (?T$ &3 ($T5(1
I(( I +&/$( (?T$ N Inflows at lower rate# investment
####################################################
Inflows at lower rate > inflow at higher rate
?s a sum of pre#discounted cash inflow is less then cost of investment there can;t be I((
&( I(( S J
8?6 B?CO 8$(I&2
8ay back period I based period N Investment > CC3?T
##########################
1e!t CC3?T
Total investment has not been realised by cash inflow" so there is no pay back period.
($T5(1 &1 I1.$4T%$1T
(eturn on investment I ?verage cash inflow W 'JJ
##################################
:C
?verage investment
?verage cash inflow I :JH:G'J I :JH.:
?verage investment I :')@G ) I )JB).@
(&I I :JH.:G)JB).@ W 'JJ
I 'H.FT &( )JT
T?B+$ 1&.0.J:
8(&-$CT :7 E$4TI%?T$ B52A$T (4 F')@ +?O*4D
:F
6$?( 8B2T +$44
2$8($
CI?TI&1
?4 8$(
T?V
8BT +$44
T?V
00T
8?T ?22
2$8($
CI?TI&1
C3?T CC3?T
' '')) )F:: #'C)) #@BF #''@: )F:: 'BHJ 'BHJ
) 'BC) CH) FFJ )HJ @HJ CH) '0F) 0JC)
0 'BC) BC0 HHH 00J BH BC0 '0:) ::':
: 'CF) @C) ')'J 0HH F'' @C) '0F0 @CHC
@ 'FH) :FC ':J@ :B: H:' :FC ':)F C))@
B 'BC) :': ')@F :'@ F:0 :': ')@C F:F)
C 'F'@ 0@' ':B: :F0 HF' 0@' '00) HF':
F 'BC) )HH '0C0 :@0 H)J )HH ')'H ''J00
H '00' )@: 'JCC 0@@ C)) )@: HCB ')JJH
'J '::' )'B '))@ :J: F)' )'B 'J0C '0J:B
T&T?
+
'BJC' BHJ) H'BH 0J)@ B':: BHJ) '0J:B
:H
INTERPRITATION:
8resent value cash inflow IC0HJ
8resent value cash outflowIF')@
1$T 8($4$1T .?+5$ %$T*&2
1et present value I cash inflow > cash outflow

I C0HJ > F')@
18. , '0T I # C0@
8(&3IT?BI+IT6 I12$V
8.I I Total present value of cash inflow G total investment
IC0HJGF')@
@J
6$?(4 C3?T 8.,'0T T&T?+ 8. 8.,)JT T&T?+
8.
CC3?T
' 'BHJ .FF:HB ':HB .HJJHJ '@)0 'BHJ
) '0F) .CF0'@ 'JF) .F''B) '')) 0JC)
0 '0:) .BH0J@ H0J .C0'CH HF) ::':
: '0F0 .B'00) F:F .B@FC0 H'' @CHC
@ ':)F .@:)CB CC@ .@H0:@ F:C C))@
B ')@C .:FJ0) BJ: .@0:BC BC) F:F)
C '00) .:)@JB @BB .:F'BB B:) HF':
F ')'H .0CB'B :@H .:00H0 @)H ''J00
H HCB .00)FF 0)@ .0HJH) 0F) ')JJH
'J 'J0C .)H:@H 0J@ .0@)'F 0B@ '0J:B
T&T?+ '0J:B
I.JH' Times
I1T$(1?+ (?T$ &3 ($T5(1
I(( I +&/$( (?T$ N Inflows at lower rate# investment
####################################################
Inflows at lower rate > inflow at higher rate
I '' N C0HJ > F')@
#####################
CHC@ # C0HJ
I '' > J.@'
I'J.:T
8?6 B?CO 8$(I&2
8ay back period I based period N investment > CC3?T
############################
1e!t CC3?T
I @ N F')@ # C))@
##############
')@C
I @ N .C
I @.C %onths
($T5(1 &1 I1.$4T%$1T
(eturn on investment I ?verage cash inflow W 'JJ
##################################
?verage investment
@'
?verage cash inflow I '0J:BG'J I '0J:.B
?verage investment I F')@G ) I :JB).@
(&I I '0J:.BG:JB).@ W 'JJ
I 0)T
8(&-$CT @7 E$4TI%?T$ B52A$T (4 'H)J +?O*4D
6$?( 8B2T +$44
2$8($
CI?TI&1
?4 8$(
8BT +$44
T?V
00T
8?T ?22
2$8($
CI?TI&1
C3?T CC3?T
@)
T?V
' H'.F BC) #@FJ.) 'H'.@ 0FF.C BC) )F0.0 )F0.0
) '0B.F 'FC #@J.) #'B.B #00.B 'FC '@0.: :0B.C
0 '0B.F '@H #)).) #C.0 #':.H '@H '::.' @FJ.F
: ':@.F '0@ 'J.F 0.B C.) '0@ ':).) C)0
@ '@:.F ''@ 0H.F '0'.' )B.C ''@ ':'.C FB:.C
B '0B.F HF 0F.F ').F )B.J HF '):.J HFF.C
C ':F.@ F0 B@.@ )'.B :0.H F0 ')B.H '''@.B
F '0B.F C' B@.F )'.C ::.' C' ''@.' ')0J.C
H 'JF.H BJ :F.H 'B.' 0).F BJ H).F '0)0.@
'J ''C.H @' BB.H )).' ::.F @' H@.F ':'H.0
T&T?
+
'0':.H 'B0' #0'B.' #'J:.: #)''.C 'B0' ':'H.0
@0
INTERPRITATION:
8resent value cash inflow IF@'
8resent value cash outflowI'H)J
1$T 8($4$1T .?+5$ %$T*&2
1et present value I cash inflow > cash outflow

I F@' # 'H)J
18. , '0T I'JBH
8(&3IT?BI+IT6 I12$V
8.I I Total present value of cash inflow G total investment
@:
6$?(4 C3?T 8.,'0T T&T?+ 8. 8.,)JT T&T?+
8.
CC3?T
' )F0.0 .FF:HB )@' .HJJHJ )@C )F0.0
) '@0.: .CF0'@ ')J .F)B@: ')C :0B.C
0 '::.' .BH0J@ 'JJ .C@'0' 'JF @FJ.F
: ':).) .B'00) FC .BF0J' HC C)0
@ ':'.C .@:)CB CC .B)JH) FF FB:.C
B '):.J .:FJ0) BJ .@B::C CJ HFF.C
C ')B.H .:)@JB @: .@'0B' B@ '''@.B
F ''@.' .0CB'B :0 .:BB@' @: ')0J.C
H H).F .00)FF 0' .:):'J 0H '0)0.@
'J H@.F .)H:@H )F .0@JJH 0C ':'H.0
T&T?+ ':'H.0 F@' H:)
IF@'G'H)J
IJ.:: Times
I1T$(1?+ (?T$ &3 ($T5(1
I(( I +&/$( (?T$ N Inflows at lower rate# investment
####################################################
Inflows at lower rate > inflow at higher rate
?s a sum of pre#discounted cash inflow is less then cost of investment there can;t be I((
&( I(( S J
8?6 B?CO 8$(I&2
8ay back period I based period N investment > CC3?T
############################
1e!t CC3?T
Total investment has not been realised by cash inflow" so there is no pay back period
($T5(1 &1 I1.$4T%$1T
(eturn on investment I ?verage cash inflow W 'JJ
##################################
?verage investment
@@
?verage cash inflow I ':'H.0G'J I ':'.H0
?verage investment I 'H)JG ) I HBJ
(&I I ':'.H0GHBJ W 'JJ
I ':.CFT &( '@T
IV. CONCLUSIONS AND SUGGESTION :
The study concerned with the capital budgeting with reference to *?$(IT?A$" the date
is collected" organised analysed and interpreted. *?$(IT?A$ has a good organisation
@B
culture" e!cellent working environment and a very precioHus asset that is highly dedicate"
hardworking well qualified efficient and knowledgeable workforce.
The following findings are obtained from the analysis of data
The first proect ie." generation is the unequal cash flows for 'J years" the initial
investment is (s @"')@ lakhs.
'D 18. and I(8 are positive for the proposal. Then the required rate of
return 'C.CT
)D The profitability inde! is '.)) times X'
0D The return of investment is :0.F T.
The second proect ie." generation is the unequal cash flows for 'J years. The
initial investment is (s 'J")@J lakhs
'D The discounted 8B8 is 0.' years" the investment will recover in 0 years
and ' month
)D 18. and I(( are positive for the proposal then the required rate of
return )F T
0D The profitability inde! is '.C: times.
:D The return of investment is B).H T
The third proect ie." generation is the unequal cash flows for 'J years. The initial
investment is (s :')@ lakhs
'D Total investment has not been realised by the cash inflow. 4o there is no
pay back period E8B8D.
)D 18. and I(( are negative for the proposal as a sum of pre#discounted
cash inflow is less than cost of investment there can;t be I(( EorDI((SJ.
0D The profitability inde! is J.@F times" it is not good.
@C
:D The return of investment is 'H.F T.
The fourth proect ie." generate is the unequal cash flows for 'J years. The initial
investment is (s7F')@ lakhs.
'D The discounted 8B8 is @.C years. The investment will recover in @ years
and C months.
)D 18. and I(( are negative for the proposal then th required rate of return
'J.:T.
0D The profitability inde! is J.H times" it is not good sign.
:D The return of investment is 0) T.
The fifth proect ie." generation is the unequal cash flows for 'J years. The initial
investment is (s 'H)J lakhs
'D Total investment has not been realised by the cash inflow. 4o there is no
pay back period E8B8D.
)D 18. and I(( are negative for the proposal as a sum of pre#discounted
cash inflow is less than cost of investment there can;t be I(( EorDI((SJ.
0D The profitability inde! is J.:: times" it is not good.
:D The return of investment is ':.CF T.
3irst proect in all conte!ts 8B8 of :.) years" 18." I((" (&I and 8I are positive
as its return are positive sign therefore the proect is accepted.
4econd proect in all conte!ts 8B8 of 0.' years" 18." I((" (&I and 8I are
indicating of positive sign therefore the proect is accepted.
Third proect 18. and I(( are negative for the proposal as a sum of pre
discounted cash inflow is less than cost of investment there can;t be I(( EorD I((
SJ. Total investment has not been realised by the cash inflow" so there no 8B8.
@F
The 8X I is J.@F times" it is not a good" (&I is )JT" it indicating values so the
proect is required.
3ourth proect 18. is negative sign and I(( is 'J.:T" 8I is J.H times this is not
good sign" 8B8 is @.C months" (&I is 0)T the proect if may increase the 18.
may get profits so the proect is accepted.
3ifth proect 18. and I(( are negative for the proposal as a sum of pre
discounted cash inflow is less than cost of investment there can;t be I(( EorD I((
SJ. Total investment has not been realised by the cash inflow" so there no 8B8.
The 8X I is J.:: times" it is not a good" (&I is '@ T" it indicating values so the
proect is required.
BIBILIOGRAPH1
Aupta 4hahi O 9 4harma" (.O. 3inancial %anagementR theory and practice 0
rd
edition )JJ'" Oalyani 8ublishers.
Ohan %.6. 9 -ain 8.OR Te!t" problems and cases :
th
edition" )JJ:.
@H
I.%. 8andey7 3inancial %anagement H
th
edition )JJ@ .ikas 8ublishing *ouse
8rivate +imited.
8rasanna Chandra7 3inancial %anagement7 Theor:y and 8ractise @
th
edition )JJ'.
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