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Birla Institute of Technology & Science, Pilani

Distance Learning Programmes Division


First 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.

Q.1

: ET ZC414
: PROJECT APPRAISAL
: Open Book
: 60%
: 3 Hours
: 28/09/2008 (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.
Leave about one inch margin space on all four sides of the answersheet.
Mobile phones and computers of any kind should not be used inside the examination hall.

Django Fashion Garments Ltd. have set up a manufacturing facility for production of designer
shirts with an initial capital of Rs. 2.5 crores. They have decided to work on profit
maximization as their objective.
What are the limitations or shortcomings of this objective?
Is profit maximization the best objective? Justify your answer.

[5]

Q.2

Imperfections in factor markets lead to positive NPV for new projects. Enumerate.

[5]

Q.3

The projected per capita demand for jeans for a selected population of 10.5 lakhs is 0.05 and
the income elasticity of demand is 1.35. Estimate the aggregate demand if per capita
income rises from Rs. 125000 p.a to Rs. 160000 p.a.
[5]

Q.4

What should be the main consideration in deciding the location of an Electrolytic grade
copper manufacturing plant?
[5]

Q.5

From the following data (Figs. in thousands of rupees) calculate Earnings per share.
Sales=10000, Accounts receivable=2500, Current liabilities=500, Cost of goods sold=6000,
Other expenses=1000, Interest=800, Taxes=1000, Inventory=3000, Long-term debt=3000,
No. of shares outstanding = 1000.
[5]

Q.6

Given PBIT = Rs. 1 crore,


Depreciation = Rs. 20 lakh,
Interest = Rs.40 lakh, Tax Rate
= 40%
Show that Net Cash Flow remains unaffected by changes in amount of interest payable.
[5]

Q.7

List three most important parameters for a project. What do these parameters depend upon?
List the parameters in order of importance in civil construction.
[5]

Q.8

Draw a PERT diagram for the following project and indicate the critical path. Construction of
a new hostel building to provide additional accommodation for 400 new students by Dec.
2008 at a cost not to exceed Rs. 1.5 crores.
[5]

ET ZC414

First Semester 2008-2009

Page 1 of 2

ET ZC414 (EC-2 REGULAR)

Q.9

FIRST SEMESTER 2008-2009

PAGE 2

The Infrastructure Corporation of India Ltd. has sanctioned a term loan of Rs. 900 crores for a
new infrastructure project which would have a life of 25 years. The capital outlay on the
project would be as follows
Item
Rs.in crores
Land
3
Buildings
150
Imported equipment
82.5
Import duty on imported equipment
22.5
Indigenous equipment
750
Transport
15
Engg. & know-how fees
75
Pre-operative expenses
72
Bank charges
30
The working capital requirement of the project consisting only of indigenous raw materials
would be Rs.240 crores.
Calculate (for IDBI) the difference between financial cost and social cost of initial outlay.
[10]

Q.10 An irrigation project requires an initial investment of Rs.7 crores and operating expenditure of

Rs. 70 lakhs per annum. The project would have a perpetual life. All capital as well as
operating inputs would be procured domestically.
Consumers (4400 farmers) are willing to pay Rs. 3600 per year for the facility but the
government 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

First Semester 2008-2009

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