Final Progect

UNIVERSITY OF PUNE, PUNE
 INTRODUCTION OF THE STUDY:-

As we know that the finance is a life blood of every
organization, whether this finance is utilize in proper way or not we
can see with the help of Capital Budgeting.
A budget is as a comprehensive and coordinated plan, expressed
in financial terms, for the operation and resources of an organization
for some specified period in the future. There are many methods or
techniques to analyze the Capital of the organization.
The Capital budgeting is a set of accounts in the Organizational
Financial Management System (FMS) that are used to record all
revenues, expenditures, assets, and liabilities associated with Capital
Projects.
In the MBA course in plant, training is mandatory because the
students face the practical situation which financial manager face in
real life.
As a rule of University pune, pune every student are supposed
to go for their summer training of their choice and interest.
During this, period student get an excellent opportunity of
learning through observation of real life problem and tacking those
problem for the benefit of the organization.
 OBJECTIVE OF THE STUDY :-
 SCOPE OF THE STUDY:-
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The scope of the study extends to the business of M/S Warana

Bazar. The study conducted during the year 2010. This study
incorporated with in its scope and exhaustive capital budgeting of the
organization.
This study falls in the area of Warana Bazars. All budgets have
been studied with respect to Warana Bazars.
 RESEARCH METHODOLOGY:
Research method may be explained all those techniques that are
used conduct a research.
Research methodology refers to the behavior and instruments
used in selecting and constructing research technique.
The task of data collection begins after a research problem has
been defined and research design / plan chalked out while deciding
about the method of data collected to be used for.
In this study two types of data are considered.

1. Primary data,
2. Secondary data.
 Primary data:-
 The primary data are those collected fresh and first time, and
thus they are original in character.
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 The source of primary data is collected where through the actual

work experience in the company and discussion with the
executive, offers and the managers in the organization.
 The technique used for collection of the primary data is
interviewing technique.
 Mostly the interviewing technique is used to collect the
information related to fresh cases but sometimes if the
information is required in relation with old cases, which is
useful for the study the same method is adopted.
 Secondary data :-
 The secondary data is that which is already been recorded in the
different files of the organization and these are already been
passed through statistical process.
 The secondary data is collected from various sources; these
sources are reference books, annual report of the company and
through internet. Some booklets and pamphlets of the
organization are also referred for collection of secondary data.
 LIMITATION OF THE STUDY :-

• Time constraint :-
The time required for the study of capital budgeting is a
large as compared to the analysis of the other methods.
This is the one of the limitation of the capital budgeting.
• Lack of information :-
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To maintain the secrecy of the organization many

statements were not available to the researcher at the time
of research.
INTRODUCTION TO THE ORGANIZATION
1. LATE SHREE TATYASAHEB KORE:-

Shree Tatyasaheb Kore, founder of Warana Complex, was a great
personality having vision for the prosperity of rural people. He is the only
person of unmatched qualities who worked day night for upliftment of rural
people.
Warana Co-Operative Complex at Waranagar in 30 Kms, situated at
Northwest of Kolhapur in Maharashtra. In 1955 a Co-Operative Sugar
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factory number of other Co-Operative industries were started such as

WAGPOS food processing, Milk & Milk Products Processing, Warana
Bazaars etc. Warana Complex was established for the purpose of providing
recruitment to the people, to provide consumer oriented product and
services to share-holder and employees and of the societies (Especially
Warana Bank, Bazaar, Education, Educational industries etc.)
2. INTRODUCTION OF WARANA BAZAR:-

As Tatyasaheb Kore had vision for development of rural people after
starting Co-Operative, Sugar factory, he observed that the people have to
travel long way to Kolhapur, Sangali etc. For purchasing goods required to
meet day to day needs. Even Quality Goods At Reasonable rates with
pleasant service.
Thus the first departmental stores in Rural area of Maharashtra was
started in Warananagar. Warana Bazaar was started at Waranagar it with
initial share capital of Rs.6,42,125 and Funds of Rs. 3,07,688 in the year
1978, with the assistance of the Consultancy and promotional cell of the
N.C.C.F. Ltd., New Delhi.
3. OBJECTIVE BEHIND ESTABLISHING WARANA

BAZAR:-
 To supply quality goods at fair & reasonable price to the Consumer.
 To make available all types of goods at single place i.e. Departmental

stores
 To save the Time and Money of the people .
 To provide good service and common rate to all Customers.
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 To provide defined credit facility to employees by way of salary

deduction at source.
 To ensure quality and guarantee for products such as seeds, fertilizers,

electronic goods etc.
4. Features of warana bazaars:-

 It is the first departmental stores established in India in rural area.
 Nearly 80% participation in shareholder of women.
 Employee 60% women are in staff.
 Audit class ‘A’ since beginning.
 Bazaar having 10,000 sq. ft. selling area.
 Total sales of all the units are nearly 16 lacks per day.
 A store having training center for various Bazaars as well as

consultancy wing.
 More than 4000 Customers per day.
5. ADDITIONAL ACTIVITIES
 Barcode system, STD/ISD/PCO Booths, Xerox Service.
 Organization of demonstration of various types of goods & various

awareness camps.
 Consumer meeting every year.

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 Implementation of different schemes for sales promotion.
 Food testing laboratory.
 Children park.
6. HRD FUNCTION – STAFF TRAINING &

DEVELOPMENT
 Consumer Co-op. Movement needs trained staff. In order to get
trained staff they have started a training centre under the name &
style Vilasrao Tatyasaheb Kore Consumer Co-op.
 Training Centre in the year 1996 every year salesman programme of

one month duration is conducted in the centre.
 NABARD & Shivaji University Kolhapur has approved this

programme.
 First Ten students of every batch absorbed in Warana Bazaar.
7. CONSULTANCY & IN STORE TRANING

 Warana Bazaar has provided consultancy & in store training too
many Co-op. Bazaars, to name in few.
 Raigad Bazaar, Alibag.

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 Raigad Bazaar, Pen.
 Tarun Bharat Bazaar, Sangali.
 Lonavala Bazaar, Lonavala.
 Bardes Bazaar, Goa.
 Bagayat Bazaar, Goa.
 Jawahar Bazaar, Dhule.
 Malavani Bazaar, Malvan.
 Shivshankar Bazaar, Akluj.
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8. THE BOARD OF DIRECTORES:-

The board of Directors is handling all the management carefully of the
Bazaar.
The Board of Directors is as:
 Chair person 01
 Vice Chairperson 01
 Female Directors 12
 Mal Directors 07
 General Manager Ex. Officer 01

 Employees Representatives 04
26
After the election of Board of Directors Chairman and Vice Chairman is
selected from them. At present 13 members of Board of Directors are women &
Chair Person is women.
Board meeting are called every month for discussing ideas of facilities in
stores. Board meeting records are regularly maintained.
The board has constituted sub-committee to look after day to day
management of stores.
They are as follows:
 Purchase sub-committee 07
 Staff selection sub-committee o7

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 Branch committee 06
 Audit committee 07
9. MEMBERSHIP AND SHARE CAPITAL:

Total membership of stores consisted of 10110 member out of which
is nearly 80% of them are women. The total share capital of organization is
1, 14, 56,615.
10.INCENTIVE BENEFITS & ACTIVITIES FOR

MEMBER/ASSOCIATE MEMBER.
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Sr. Description
No
.
2 8% rebate on the purchase of festival goods at the time of Gudhi
Padva
3 10 % cash rebate coupons for use of throughout the year. Total 26%
investment in share in the society (for ‘A’ class members).
4 Haldi-Kunku Ceremony for lady members at the time of Makar
Sankrant.
5 Purchase Rebate to customers 0.5%
11.Incentive & Benefits To the staff:

Sr. No. Description Percent
1 Provident Fund 12.0
2 Bonus 25.0
3 Incentive 12.5
4 House Rent Allowance 05.0
5 Pension Scheme 05.0
Total 59.5
 34 days leave
 Three Months Maternity leave
 On job Training for the college students
 Insurance policy for staff
 Performance incentive.
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Share Holder
Board of Director
Chairman
Vice Chairman
General Manager
Purchase Accounts Sales Branch

Manager Manager Manager Manager
Chief Auditor
Chief Cashier
MEANING Other Employee

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THEROTICAL BACKGROUND
 Budget:
Budgets are an important tool of profit planning. Is closely related
to the broader system of planning is an organization. Planning
involves the specification of the basic objective that the
organization will pursue and the fundamental policies that will
guide it. It involves four stages:
• Objective
• Goals
• Strategies
• Plans / Budget
“A budget is defined as a comprehensive and coordinated plan,
expressed in financial terms, for the operation and resources of an
enterprise for some specified period in the future”.
According to this definition, the essential elements of a budget are:
• Plan
• Operations and resources
• Financial terms
• Specified future period
• Comprehensiveness
• Coordination
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 Capital Budget
Financial management is largely concerned with financing,
dividend and investment decisions of the firm with some overall
goal in mind. Corporate finance theory has developed around a
goal of maximizing the market value of the firm to its
shareholders.
Capital budgeting decision pertain to fixed/long-term assets which
by definition refer to assets which are in operation, and yield a
return, over a period of time usually exceeding one year. They,
therefore, involve a current outlay or series of outlays of cash
resources in return for an anticipated flow of future benefits. In
other words the capital budgeting is employed to evaluate
expenditure decision which involve current outlays but are likely
to produce benefits over a period of time longer than one year.
“Capital budgeting is a process of evaluating and selecting
long-term investments that are consistent with the goal of
shareholders (owners) wealth maximization”.
Funds are invested in both short-term and long term assets. Capital
budgeting is primarily concerned with sizable investment in long-term
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assets. These assets may be tangible items such as property, plant or

equipment or intangible ones such as new technology, patents or
trademarks. Investment process such as new technology, testing-
through which new technology and new product are created may also be
viewed as investment in intangible assets.
 BUDGETING
OVERVIEW
 Brief description
This toolkit provides guidelines on how to go about developing and monitoring a
budget. It will help you with an overall organizational budget as well as with a
budget for a specific project. It includes tools for estimating costs as well as tips
for ensuring that your budgets meet the needs of your project or organization. In
the examples section we give actual examples of budgets and how they can be
monitored.
 Why have toolkits on budgeting?
Budgeting is the key to financial management. The toolkit will help you plan,
develop and use budgets effectively in your organization. If you have a sound
understanding of the principles of budgeting, you will be well on the way to
sound financial management. If you use this toolkit in conjunction with other
toolkits, as indicated, you will increase the capacity of your organization to
manage its finances effectively. You will also increase its ability to survive
through foresight and planning.
 Who should use this toolkit?
This toolkit is aimed specifically at people who have had little or no experience
with budgeting. Perhaps you have not been involved in running an organization,
project or department before. Or perhaps you have not been involved in the
financial management side of the work before. Now you are faced with the task
of developing a budget, or budgets, and you are not quite sure where to start. If
you are in a situation like this, then this toolkit will be useful for you.
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 When will this toolkit be useful?

After you have done the strategic planning for your organization, and your
action planning and you need to know how much money you will require in
order doing what you have planned. When you need to work out how much it
will cost to run a particular project or department. When you want to ask a donor
to support a particular aspect of your work.
 BASIC PRINCIPLES
• Could we have spent less last year and still achieved the same results,
or better?
• Have we wasted money in the past? If so, can we avoid doing so in
the future?
• In this section of the toolkit, we look at:
• What is a budget, who should be involved in budgeting, and why do
we budget?
• The operational plans Estimating costs Sources of finance.
 Why budget?
• Why is it important for an organization, project or department

to have a budget?
a. The budget is an essential management tool. Without a budget, you

are like a pilot navigating in the dark without instruments.
b. The budget tells you how much money you need to carry out your
activities.
c. The budget forces you to be rigorous in thinking through the
implications of your activity planning.
d. There are times when the realities of the budgeting process force you
to rethink your action plans.
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e. Used properly, the budget tells you when you will need certain
amounts of money to carry out your activities.
f. The budget enables you to monitor your income and expenditure and
identify any problems.
g. The budget is a basis for financial accountability and transparency.
When everyone can see how much should have been spent and
received, they can ask informed questions about discrepancies.
h. You cannot raise money from donors unless you have a budget.
Donors use the budget as a basis for deciding whether what you are
asking for is reasonable and well-planned.
 Who should be involved in budgeting?

Budgeting is a difficult and responsible job. Your organization’s ability to
do what it has planned to do and to survive financially depends on the
budgeting process. Whoever does the budgeting must:.
Understand the values, strategy and plans of the organization or project;
Understand what it means to be cost effective and cost efficient
Understand what is involved in generating and raising funds.
To ensure you have all these understandings, it is usually a good idea to
have a small budgeting team. This may only mean that one person does a
draft budget which is then discussed and commented on by the team.
The following would normally be involved in the budgeting process:
The Finance Manager and/or Bookkeeper;
The Project Manager and/or Director of the organization or department.
Where staff lack confidence to do the budgeting, then Board members can
be brought in.
Some Boards have a Finance Committee or a Budget Sub-Committee. It is
a good idea to have someone on your Board with financial skills. S/he can
then help the staff with budgeting.
The budget is the business of everyone in the organization.
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• The planning cycle should look something like this:
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• Capital Budgeting
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• Capital Budgeting is a project selection exercise performed by the business

enterprise.
• Capital budgeting uses the concept of present value to select the projects.
• Capital budgeting uses tools such as payback period, net present value,
internal rate of return, profitability index to select projects.
Capital Budgeting process:

1
Goal of the Firm

Maximization Shareholder wealth or value of the firm
Financing Decision Dividend Decision Investment Decision
2 investments
Long-term Short-term investments
CAPITAL BUDGETING
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Investment
Strategic
Corporate
opportunities
planning
goal

Preliminary screening
Financial appraisal, Quantitative analysis, project evaluation

or project or project analysis
Qualitative factors, judgments and gut felling
Accept/reject decision on the projects
Accept Reject
Implementation
Facilitation, monitoring, control and review
Continue, expand or abandon project
Post-implementation audit
Capital Budgeting Implement Monitor
Monitor Implement Make a Decision
• Study of the Objectives

• Define the capital budgeting decision within the broader perspective
of financial management.
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• Describe how the net present value contributes to increasing share

holder wealth.
• Classify investment projects on the basis of how they influence the
investment decision process.
• Sketch out a board overview of the capital budgeting process.
• Identify the financial appraisal of projects as one of the critically
important and complex stages in the capital budgeting process.
• Appreciate the important of using computer spreadsheet packages
such as excel for capital budgeting computation.
• Gain a broad overview of how the material in this book is organized.
 Learning objective of capital Budgeting:
Non discounted Methods
Capital
Discounted Method
Capital
Budgeting
Project
Relevant cash flows
Classifications
Estimation
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• Importance Of Capital Budgeting:

• Strategic direction
• Long term decision and effects last longtime
• It might have serious financial
• consequences
 Kinds of capital budgeting decisions:
1. Accept-reject decisions: Business firm is confronted with alternative investment

proposals. If the proposal is accepted, the firm incur the investment and not otherwise.
Broadly, all those investment proposals which yield a rate of return greater than cost
of capital are accepted and the others are rejected. Under this criterion, all the
independent proposals are accepted.
2. Mutually exclusive decisions: It includes all those projects which compete with
each other in a way that acceptance of one precludes the acceptance of other or others.
Thus, some technique has to be used for selecting the best among all and eliminates
other alternatives.
3. Capital rationing decisions: Capital budgeting decision is a simple process in

those firms where fund is not the constraint, but in majority of the cases, firms have
fixed capital budget. So large amount of projects compete for these limited budgets.
So the firm rations them in a manner so as to maximize the long run returns. Thus,
capital rationing refers to the situations where the firm has more acceptable
investment requiring greater amount of finance than is available with the firm. It is
concerned with the selection of a group of investment out of many investment
proposals ranked in the descending order of the rate or return.
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Capital budgeting success

• Flow of ideas
• Proper incentive
• Screening
• Selection by priority
Does all projects require capital budgeting?
• Cost of capital budgeting should be considered

• Simple or complicated decisions
• Value of investment to the firm
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 Independent & mutually exclusive projects?

Projects are:
• In dependent, if the cash flows of one are unaffected by the
acceptance of the other.
• Mutually exclusive, if the cash flows of one can be adversely
impacted by the acceptance of the other.
 Capital budgeting decision rules

• Payback period
• Discounted payback period
• NPV
• IRR
• MIRR
• Profitability index
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1.Payback period :
The number of years required to recover a project’s

cost,
or how long does it take to get the business’s money
back?
 Computation Of Payback Period
• When the cash inflows are uneven, the cumulative cash inflows are to be
arrived at and then the payback period has to be calculated through
interpolation.
Here payback period is the time when cumulative cash inflows are equal
to the outflows. i.e.
Paybacks = year before recovery + uncovered cost at start of year

Cash flow during the year
 Payback Reciprocal Rate

• The payback period is stated in terms of years. This can be stated
in terms of percentage also. This is the payback reciprocal rate.
• Reciprocal of payback period = [1/payback period] x 100
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 Capital Rationing Situation

• Select the projects which have payback periods lower than or
equivalent to the stipulated payback period.
• Arrange these selected projects in increasing order of their
respective payback periods.
• Select those projects from the top of the list till the capital Budget
are exhausted.
• Decision Rules :
 . Mutually Exclusive Projects :

In the case of two mutually exclusive projects, the one with a lower
payback period is accepted, when the respective payback periods are less
than or equivalent to the stipulated payback period.
 Determination of Stipulated Payback Period

• Stipulated payback period, broadly, depends on the nature of the
business/industry with respect to the product, technology used and speed at
which technological changes occur, rate of product obsolescence etc.
• Stipulated payback period is, thus, determined by the management’s
capacity to evaluate the environment vis-a-vis the enterprise's products,
markets and distribution channels and identify the ideal-business design
and specify the time target.
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 Advantages Of Payback Period
• It is easy to understand and apply. The concept of recovery is familiar to

every decision-maker.
• Business enterprises facing uncertainty - both of product and technology

- will benefit by the use of payback period method since the stress in this
technique is on early recovery of investment. So enterprises facing
technological obsolescence and product obsolescence - as in
electronics/computer industry - prefer payback period method.
• Liquidity requirement requires earlier cash flows. Hence, enterprises

having high liquidity requirement prefer this tool since it involves minimal
waiting time for recovery of cash outflows as the emphasis is on early
recoupment of investment.
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 Disadvantages Of Payback Period
• The time value of money is ignored. For example, in the case of project
• A Rs.500 received at the end of 2nd and 3rd years are given same weight
age. Broadly a rupee received in the first year and during any other year
within the payback period is given same weight. But it is common
knowledge that a rupee received today has higher value than a rupee to be
received in future.
• But this drawback can be set right by using the discounted payback period
method. The discounted payback period method looks at recovery of initial
investment after considering the time value of inflows.
• Another important drawback of the payback period method is that it

ignores the cash inflows received beyond the payback period. In its
emphasis on early recovery, it often rejects projects offering higher total
cash inflow.
• Investment decision is essentially concerned with a comparison of rate of

return promised by a project with the cost of acquiring funds required by
that project. Payback period is essentially a time concept; it does not
consider the rate of return.
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2. ACCOUNTING RATE OF RETURN

Accounting rate of return is the rate arrived at by expressing the
average annual net profit (after tax) as given in the income statement as
a percentage of the total investment or average investment. The
accounting rate of return is based on accounting profits. Accounting
profits are different from the cash flows from a project and hence, in
many instances, accounting rate of return might not be used as a project
evaluation decision. Accounting rate of return does find a place in
business decision making when the returns expected are accounting
profits and not merely the cash flows.
o Computation Of Accounting Rate Of Return

o
• The accounting rate of return using total investment. or
Sometimes average rate of return is calculated by using the following
A.R.R. = Net profit after tax

Average Investment
Where average investment = total investment divided by 2

 Decision Rules
A. Capital Rationing Situation
• Select the projects whose rates of return are higher than the cut-off
rate
• Arrange them in the declining order of their rate of return and
• Select projects starting from the top of the list till the capital
available is exhausted.
B. No Capital Rationing Situation

Select all projects whose rate of return are higher than the cut-off rate.
C. Mutually Exclusive Projects
Select the one that offers highest rate of return.
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• Accounting Rate Of Return – Advantages

o It Is Easy To Calculate.
o The Percentage Return Is More Familiar To The Executives.
Accounting Rate of Return – Disadvantages

• The definition of cash inflows is erroneous; it takes into account profit after
tax only. It, therefore, fails to present the true return.
• Definition of investment is ambiguous and fluctuating. The decision could
be biased towards a specific project, could use average investment to
double the rate of return and thereby multiply the chances of its
acceptances.
• Time value of money is not considered here.
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3. NET PRESENT VALUE (NPV)

Net present value of an investment/project is the difference between present
value of cash inflows and cash outflows. The present values of cash flows are
obtained at a discount rate equivalent to the cost of capital.
Computation Of Net Present Value (Npv)

• Let 'b' be the cash outflow in period 't' where t = 0,1,2,....n
• 'B' is the present value of cash outflows
• 'c' be the cash inflow in period’t’=0, 1, 2 ...n
• 'C' be the present value of cash inflows
• 'K' be the cost of capital
• Then
n ct
Present value of cash inflows=C=∑
t=0 (1+K)t
n bt
Present value of cash outflows=B=∑
t=0 (1+k)t
Net present value=(C-B) or
NPV= Present values of cash inflows – Initial cash outflows.
Computation Of Net Present Value (Npv)

• When the cash outflow is required for only one year i.e., in the present year, then the Net
present value is calculated as follows:
N ct
Net present value=∑ -I
t=o (1+K)t
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"I" is the initial investment (cash outflow) required by the project.
Decision Rules
A. "Capital Rationing" situation
Select projects whose NPV is positive or equivalent to zero.

Arrange in the descending order of NPVs.
Select Projects starting from the list till the capital budget allows.
B. "No capital Rationing" Situation
Select every project whose NPV >= 0

C. Mutually Exclusive Projects
Select the one with a higher NPV.
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Internal Rate of Return Method (IRR)

# Motivation:
! “Internal” in that it is a rate of return that depends on the CFs
of the project.
! Return on investment (ROI) is a very intuitively appealing
concept; measured in % terms.
ROI ’= profit
investment
! Easy to determine profit if you have single CF in future. What

about if we have multi-period payoffs?
Thus, when examining the return on a project, we need a

new tool that would incorporate all the cash flows of a
project.
Definition of IRR : IRR is defined as that particular k, such that

the project breaks-even, i.e., when NPV = 0.
Thus,
N1
IRR=r1 + X (r2-r1)
N1+N2
NPV - 0 - CF0 + CF1 + CF2 + …… + CFN

(1 + IRR) (1 + IRR) 2
(1 + IRR)N
D.S.& K.G.P’S . SIMS, MBA Page

34
Decision Rule:
IRR Criterion: Choose projects with IRR higher than cost of
financing.
Decision Rules A. "Capital Rationing" Situation Select those projects whose IRR (r) = k,
where k is the cost of capital. Arrange all the projects in the descending order of their Internal Rate of
Return. Select projects from the top till the capital budget allows. B. "No Capital Rationing"
Situation Accept every project whose IRR (r) = k, where k is the cost of capital. C. Mutually
Exclusive Projects Select the one with higher IRR.

35
Profitability Index
Definition: Profitability Index (PI) is the ratio of the
present value
of future cash flows and the initial cost of a project:
PV PV
PI = =
−CF0 I0
.
Decision Criterion Using PI
• For independent projects: Accept all projects with PI
greater
than one (this is identical to the NPV rule)
• For mutually exclusive projects: Among the projects
with PI
greater than one, accept the one with the highest PI.
Problems with PI
PI gives the same answer as NPV when
(1) There is only one cash outflow, which is at time 0
(2) Only one project is under consideration.
PI scales projects by their initial investments. The
scaling can
lead to wrong answers in comparing mutually
exclusive projects.

36
 DATA ANALYSIS AND INTERPRETATION
INTRODUCTION:-
Capital budgeting is a process in which complex set of information break

down into simple information and in interpretation ; the explantion are given
for analyzed data.
Data and interpretation of this report is based on the research that was
conducted in kolhapur during the year 2010 when research thet was doing in
the summer training in Warana Bazar concern in kolhapur. For finding the
capital budgeting of the firm for expantion of firm the researcher is
provided with all financial docoments of the firm.
This data and interpretation is based on the documents provided by the

company which include Balance sheet, profit and loss account and sales
budget of the firm. The research consuls last three years balane sheet, profit
and loss accont and sales budget of the firm to reach up to real conclusion.

37
 Warana bazaar is a consumers’ oriented store. Due to

the increase in population in Kolhapur organization has
decided to expand a business. With the following
changes in the operating parameters’ are forecasted.
 Increase in projected sales revenue by the 25 per cent due to faster

developing Kolhapur.
 10 percent increases selling expenses to support increased sale.
 10 percent increases administrative expenses to support increased

sale.
 Increases variable expenses, 15 percent as a result of stoking of

goods and setting up of additional maintenance facility.
 The cost of new product would be required acquisition of product

Rs. 65 core
 Tax rate is 35%.
 Depreciation charge 32 lakh per annum.
 PV. rate is 10%.

38
• Past revenue and expenses data .

Table NO: 1
Past data
sales Administrative Selling Variable
Year
(core) Expenses Expenses Expenses
1 79.99 0.96 2.51 0.38
2 81.67 1.05 2.86 0.39
3 86.49 1.09 3.06 0.37
4 91.41 1.16 2.83 0.34
Chart NO:1

39

40
Chart No.2

41
Table No: 2
Projected Data
Year sales (core) Administrative Expenses Selling Expenses Variable Expenses
1 97.81 1.17 3.03 0.36
2 105.62 1.26 3.27 0.39
3 117.24 1.40 3.63 0.44
4 131.31 1.57 4.07 0.49
5 148.38 1.78 4.59 0.55
Chart No: 3

42
Chart No:4

43
Table No: 3
Incremental Cash Flow After Tax And Net Present Value
Particular 1 2 3 4 5
Incremental sales revenue(.25*projected sales revenue) 24.45 26.41 29.31 32.83 37.10
less : Incremental administrative expenses (.10*selling 0.12 0.13 0.14 0.16 0.16
exp) 0.30 0.33 0.36 0.41 0.46
less : Incremental selling expenses (.10*Admin exp) 0.05 0.06 0.07 0.07 0.08
less : Incremental selling expenses (.15*Variable exp)
less depreciation 0.32 0.32 0.32 0.32 0.32
Earnings before tax 23.66 25.57 28.42 31.87 36.08
less taxes 7.10 7.67 8.53 9.56 10.82
earnings after tax 16.56 17.90 19.90 22.31 25.25
CFAT 16.88 18.22 20.22 22.63 25.57

pv factors .10 0.909 0.826 0.751 0.683 0.621
present value 15.34 15.05 15.18 15.46 15.88

Total present value 76.91
less cash outflow 65
Net present value 11.91

44
Chart No: 5

45
EVALUATION TECHINIQUES :
1. Average Rate Of Return:
Average annual profit after taxes
ARR= X 100
Average investment over the life of the project
Table No: 4
Particular Rs(core)
Cost 65
Annual Estimated Income After Depreciation And Taxes
1
16.88
2
18.22
3 20.22
4 22.63
5 25.25
103.2
Estimated Life 5
Average Income 20.64

Average Investment 65
ARR % 31.75

46
2. Payback period

47
Paybacks = year before recovery + uncovered cost at start of year

Cash flow during the year
Table No:5
Particular Rs (core) CCF
Total Cost 65
Cash Inflows (CFAT)
1 15.59 15.59
2 16.83 32.42
3 18.68 51.1
4 20.92 72.02
5 23.66 95.68
Paybacks periods = 3year+8 months

48
3. Profitability index
Present value of cash inflows
PI=
Present value of cash outflows
=95.68/65
=1.47

49

50
4. Initial Rate Of Return
N1
IRR=r1 + X (r2-r1)
N1+N2
Table No: 6
YEAR Cash Flow PV Rate (17%) CCF
1 16.88 0.855 14.43
2 18.22 0.731 13.32
3 20.22 0.624 12.62
4 22.63 0.534 12.08
5 25.25 0.456 11.51
63.97
65
-1.03
11.91
= 10 + X (17-10)
11.91 + (-1.03)
=17.66

51
Chart No: 8

52

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UNIVERSITY OF PUNE, PUNE

 INTRODUCTION OF THE STUDY:-

 SCOPE OF THE STUDY:-

SIMS, MBA Page 1

The scope of the study extends to the business of M/S Warana

In this study two types of data are considered.

SIMS, MBA Page 2

 The source of primary data is collected where through the actual

 LIMITATION OF THE STUDY :-

To maintain the secrecy of the organization many

INTRODUCTION TO THE ORGANIZATION

1. LATE SHREE TATYASAHEB KORE:-

SIMS, MBA Page 4

factory number of other Co-Operative industries were started such as

2. INTRODUCTION OF WARANA BAZAR:-

3. OBJECTIVE BEHIND ESTABLISHING WARANA

 To make available all types of goods at single place i.e. Departmental

 To save the Time and Money of the people .

 To provide good service and common rate to all Customers.

SIMS, MBA Page 5

 To provide defined credit facility to employees by way of salary

 To ensure quality and guarantee for products such as seeds, fertilizers,

4. Features of warana bazaars:-

 Nearly 80% participation in shareholder of women.

 Employee 60% women are in staff.

 Audit class ‘A’ since beginning.

 Bazaar having 10,000 sq. ft. selling area.

 A store having training center for various Bazaars as well as

 More than 4000 Customers per day.

 Organization of demonstration of various types of goods & various

 Consumer meeting every year.

 Implementation of different schemes for sales promotion.

 Food testing laboratory.

6. HRD FUNCTION – STAFF TRAINING &

 Training Centre in the year 1996 every year salesman programme of

 NABARD & Shivaji University Kolhapur has approved this

 First Ten students of every batch absorbed in Warana Bazaar.

7. CONSULTANCY & IN STORE TRANING

 Raigad Bazaar, Alibag.

 Raigad Bazaar, Pen.

 Tarun Bharat Bazaar, Sangali.

 Lonavala Bazaar, Lonavala.

 Bardes Bazaar, Goa.

 Bagayat Bazaar, Goa.

 Jawahar Bazaar, Dhule.

 Malavani Bazaar, Malvan.

 Shivshankar Bazaar, Akluj.

SIMS, MBA Page 8

8. THE BOARD OF DIRECTORES:-

 General Manager Ex. Officer 01

 Staff selection sub-committee o7

9. MEMBERSHIP AND SHARE CAPITAL:

10.INCENTIVE BENEFITS & ACTIVITIES FOR

SIMS, MBA Page 10

11.Incentive & Benefits To the staff:

SIMS, MBA Page 11

Purchase Accounts Sales Branch

MEANING Other Employee

assets. These assets may be tangible items such as property, plant or

 When will this toolkit be useful?

• Why is it important for an organization, project or department

a. The budget is an essential management tool. Without a budget, you

 Who should be involved in budgeting?