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Birla Institute of Technology & Science, Pilani

Work-Integrated Learning Programmes Division


First Semester 2009-2010
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
: 25/10/2009 (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.

Explain the various discounting and non-discounting criteria for project selection.

[5]

Q.2. Using real life examples, explain the reasons behind positive NPV for any two projects.
[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. How can a company having reasonably high profits have cash flow problems in the short
run?
[5]
Q.5. A 25 year annuity payment Rs 500 per year offers RS 27,500 on maturity. Calculate the
discount rate.
[5]
Q.6. Modern Fashion Apparels Ltd had set up a project 5 years ago. The project has a
remaining life of 5 years. The cash flow forecast for the balance life is as follows:
Year
Cash flow forecast(Rs in crores)

1
60

2
70

3
90

4
100

5
60

The salvage value of the project if terminated immediately is Rs 240 crores. A third party
has offered to buy the project for Rs 350 crores. The discount rate is 10%. Should the
company accept the offer? Explain.
[5]
Q.7. What should be the main consideration in deciding the location of an Electrolytic grade
silver manufacturing plant?
[5]

ET ZC414 (EC-2 Regular) First Semester 2009-2010

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ET ZC414 (EC-2 Regular) First Semester 2009-2010

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Q.8. Compare the advantages and disadvantages of term loan vs equity for financing a new
project by an existing company.
[5]
Q.9. IDBI has sanctioned a term loan of Rs. 900 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 equipment
15
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. A building project was started on 15th January, 2009 and was expected to be completed by
15th July, 2009. The project was being reviewed on 15th April, 2009. The following
information is available:

Budgeted cost for work scheduled(BCWS)


Budgeted cost for work performed(BCWP)
Actual cost of work performed(ACWP)
Budgeted cost for total work(BCTW)
Additional cost for completion(ACC)

Rs (in Lakhs)
180
165
174
300
150

Determine the following:


I. Cost variance
II. Schedule variance in cost terms
III. Cost performance index
IV. Schedule performance index
V. Estimated cost performance index
[10]
*********

ET ZC414 (EC-2 Regular) First Semester 2009-2010

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