FORE SCHOOL OF MANAGEMENT

PROJECT APPRAISAL POLYPROPYLENE MULTIYARN

Synopsis

Submitted by: Surbhi Grover 191058 Aditit Goyal - 191063 11/10/2011 Amit Sharma 191069 Anushree Gupta 191079 Ritika Gupta - 191107

The group will be submitting the final project on: PROJECT APPRAISALPOLYPROPYLENE MULTIYARN. The project appraisal will cover the following heads: Marketing appraisal :

a. Projected Demand Estimates of the projected demand for each of the products proposed to be manufactured for the next five years together with source of information. Some of the sources for the estimates of future demand are specialized publications. There are a number of consultancy organizations in the country which would also be able to undertake a detailed market study on behalf of the promoters.

b. Projected Supply Estimates of the projected supply (industry aggregates) of each of the products proposed to be manufactured for the next five years together with source of information. These estimates to include data on the present installed capacity, capacity likely to materialize in each of the next five years and current production and expected production for the next five years. Figures of existing capacity and production would be available from industry publications.

c. Current Prices Details about current prices of proposed products: International, CIF, FOB and Landed cost.

d. Price Assumed For The Product Details regarding the trends in prices during the last five years. If the prices are controlled by the Government, details of the basis on which the prices were fixed for future projections of revenue. The price assumed for the product is important in deciding the viability of the project. It is advisable to assume a price somewhat lower than the net price realized by other existing manufactures. Often, a new entrant in the market would have to offer his products at a relatively lower price in order to attract customers and to get established in the market. In the case of products for which prices fluctuate at short intervals, it is preferable to assume a reasonable price based, inter alia, on the average price for the previous few quarters/months depending on the periodicity of fluctuations. It must be

noted that it is difficult for a company to realize the price prevailing during periods of temporary shortages. Financial appraisal :

A. COST OF THE PROJECT The reasonableness of the cost of the project as submitted by the borrower should be thoroughly examined. Realistic estimates should be used so as to conserve scarce resources and prevent cost over-runs. Entrepreneurs may seek to keep the project cost deliberately low or high, to minimise promoters contribution or to secure excessive funding. In assessing the project cost estimates, it is essential to guard against such possibilities. Reasonableness of the cost of the project should be examined with reference to various factors. While assessing these costs, escalation on account of inflation during the implementation period should be provided for in case of projects with longer implementation schedule exceeding one year. Cost Comparison with Similar Projects/Installed Capacity In addition to the micro assessment of various aspects of the costs discussed above, it is necessary to compare the cost of the proposed project with costs of similar projects appraised in the institutions in the recent past to ensure the reasonableness of the cost estimates. Capital cost per unit of installed capacity should be compared with similar projects appraised by the institution. However, it should be borne in mind that variations in scope of the project, implementation schedule, means of financing etc. will have a bearing on the total cost of the project and suitable adjustments should be made while comparing with similar assisted projects. B. MEANS OF FINANCE The proposed means of financing of a project proposal, as regard its reasonableness must similarly be examined. The means of financing should conform to a financially sound capital structuring of the company.

Finally the project will also include the following parameters: Develop an EXCEL BASED INTEGRATED FINANCIAL MODEL for a detailed financial feasibility study. Projected financial statements with all the schedules. Evaluation criteria. Sensitivity analysis on the following parameters: Decrease in capacity utilization by 5%. Increase in raw material prices by 5%.

Credit Risk Determination, Credit Risk Rating and Term Loan Pricing. All the work will be done with help of Microsoft excel.