Birla Institute of Technology & Science, Pilani

Distance Learning Programmes Division

Second Semester 2008-2009
Comprehensive Examination (EC-2 Regular)
Course No.
Course Title
Nature of Exam
Weightage
Duration
Date of Exam
Note:
1.
2.
3.
4.

: ET ZC414
: PROJECT APPRAISAL
: Open Book
: 60%
: 3 Hours
: 05/04/2009 (FN)

No. of Pages
=2
No. of Questions = 10

Please follow all the Instructions to Candidates given on the cover page of the answer book.
All parts of a question should be answered consecutively. Each answer should start from a fresh page.
Mobile phones and computers of any kind should not be used inside the examination hall.
Use of any unfair means will result in severe disciplinary action.

Q.1

Siyaram Chemicals Ltd. have set up a factory for manufacturing Benzaldehyde

with an initial capital of Rs. 5.5 crores. They have set profit maximization as their
sole objective.
(a)
What problem s will they face in computing profit?
(b)
Is profit maximization the best objective? Justify your answer.
[5]

Q.2

How do imperfection(s) in factor markets lead to positive NPV for new projects?
[5]

Q.3

The projected per capita demand for cars for a selected population of 1.05 lakhs is
0.08 and the income elasticity of demand is 1.75. Estimate the aggregate demand if
per capita income rises from Rs. 160000 p.a to Rs. 185000 p.a.
[5]

Q.4

What should be the main consideration in deciding the location of an Electrolytic

grade silver manufacturing plant?
[5]

Q.5

From the following data (Figures in thousands of rupees), calculate Earnings per
share.
Sales=1000, Accounts receivable=250, Current liabilities=50, Cost of goods
sold=600, Other expenses=100, Interest=80, Taxes=100, Inventory=300, Longterm debt=300
[5]

Q.6

Given PBIT=Rs. 10 lakh, Depreciation = Rs. 2 lakh, Interest=Rs.4 lakh, Tax

Rate=40%
Show that Net Cash Flow remains unaffected by changes in amount of interest
payable.
[5]

Q.7

What are the basic parameters of a project? List the parameters in order of
importance in civil construction.
[5]

ET ZC414 (EC-2 Regular)

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ET ZC414 (EC-2 Regular)

Second Semester 2008-2009

Page 2

Q.8

Draw a PERT diagram for the following project and indicate the critical path.
Construction of a new building to provide 4 additional offices by Dec. 2009 at a
cost not to exceed Rs. 550000.
[5]

Q.9

IDBI has sanctioned a term loan of Rs. 600 crores for a new infrastructure project
which would have a life of 50 years. The capital outlay on the project would be as
follows
Item
Rs. (in crores)
Land
2
Buildings
100
Imported equipment
55
Import duty on imported
15
equipment
Indigenous equipment
500
Transport
10
Engg. & know-how fees
50
Pre-operative expenses
48
Bank charges
20
The working capital requirement of the project consisting only of indigenous raw
materials would be Rs.160 crores.
Calculate (for IDBI) the difference between financial cost and social cost of initial
outlay.
[10]

Q.10 Airconditioning of BITS buildings requires an initial investment of Rs.7 crores and

operating expenditure of Rs. 70 lakhs per annum. The equipment would have a
perpetual life. All capital as well as operating inputs would be procured
domestically.
Consumers (4000 students and 400 faculty) are willing to pay Rs. 3600 per year
for the facility but BITS would charge them Rs.1200 per year.
Assuming cost of capital=10%, calculate IRR for the project from:
(i)
(ii)
(iii)

Private angle
Economic (social) angle
Also indicate all quantifiable and non-quantifiable costs and benefits. [10]

*********

ET ZC414 (EC-2 Regular)

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