A PROJECT REPORT ON CAPITAL BUDGETING WITH REFERENCE …
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ISSN NO: 0745-6999 JOURNAL OF RESOURCE MANAGEMENT AND TECHNOLOGY Vol12, Issue3, 2021 Page No:531 A PROJECT REPORT ON CAPITAL BUDGETING WITH REFERENCE TO DTDC DELIVERING VALUE Department Of Business Administration K . Bhavani, Mrs. Harika & Dr E. Sunitha , Student¹ Assistant Professor ², Professor ³ DRK COLLEGE OF ENGINEERING AND TECHNOLOGY ABSTRACT The DTDC research is being carried out using capital budgeting tools. Data has been collected through primary and secondary sources. primary data-the data that is directly collected from firm’s people. It is in the form of discussion with the employees. The data is collected through interaction with chief managing executive, franchiser. Secondary data is collected through capital budgeting manual of DTDC, newspapers, broachers. 10 years data of 5 projects has been taken as sample. Calculation of capital budgeting involves different methods. NPV, IRR, Payback Period, profitability index, return on investment these are the methods which are used in evaluation of the project. Via data analysis & interpretation we came to know that NPV is significant be cause it provides a clear estimate of the project’s financial benefit to shareholders. payback period provides an indicator of a project’s risk as well as liquidity. The profitability Index (PI) assesses a projects profitability in relation to its cost. As a this capital budgeting software assisted in determining the firms revenue .The firms profit cannot be put out without capital budgeting tools consequence ,determining a firms return is simple when employing this tool. I.INTRODUCTION Capital Budgeting is a phrase that relates to long-term planning for projected capital expenditures and their finances. As a result, it encompasses both the accumulation and usage of long-term finances. It may be described as the company's formal method for acquiring and investing funds. Calculation of capital budgeting involves different methods. NPV, IRR, Payback Period, profitability index, return on investment these are the methods which are used in evaluation of the project. II.REVIEW OF LITERATURE Rao Cherukuri (1996) done a poll of 77 Indian firms' capital budgeting practices and discovered that 48% of them utilized IRR as their major development assessment criterion. Interest expense and Payback were utilized as additional selection factors by the firms. 70% of the firms employed a terminal value of between 14 and 17 percent, whereas 38% of the consultant firms the financial leverage as a discount rate. The relevance of Loan Term and ARR as major techniques of impact assessment is diminishing, according to this assessment. P K Sahu (1989) investigated how firms in Bhubaneswar use budgetary control strategies. He discovered that firms financed regular investments through internal sources of money, but companies sustained growth
Transcript of A PROJECT REPORT ON CAPITAL BUDGETING WITH REFERENCE …
ISSN NO: 0745-6999 JOURNAL OF RESOURCE MANAGEMENT
AND TECHNOLOGY
Vol12, Issue3, 2021
Page No:531
A PROJECT REPORT ON
CAPITAL BUDGETING WITH REFERENCE TO DTDC DELIVERING VALUE
Department Of Business Administration
K . Bhavani, Mrs. Harika & Dr E. Sunitha
, Student¹ Assistant Professor ², Professor ³
DRK COLLEGE OF ENGINEERING AND TECHNOLOGY
ABSTRACT The DTDC research is being carried out using capital budgeting tools. Data has been collected through primary and
secondary sources. primary data-the data that is directly collected from firm’s people. It is in the form of discussion
with the employees. The data is collected through interaction with chief managing executive, franchiser. Secondary
data is collected through capital budgeting manual of DTDC, newspapers, broachers. 10 years data of 5 projects has
been taken as sample. Calculation of capital budgeting involves different methods. NPV, IRR, Payback Period,
profitability index, return on investment these are the methods which are used in evaluation of the project. Via data
analysis & interpretation we came to know that NPV is significant because it provides a clear estimate of the project’s
financial benefit to shareholders. payback period provides an indicator of a project’s risk as well as liquidity. The
profitability Index (PI) assesses a projects profitability in relation to its cost. As a this capital budgeting software
assisted in determining the firms revenue .The firms profit cannot be put out without capital budgeting tools
consequence ,determining a firms return is simple when employing this tool.
I.INTRODUCTION
Capital Budgeting is a phrase that relates to long-term planning for projected capital expenditures and their
finances. As a result, it encompasses both the accumulation and usage of long-term finances. It may be described
as the company's formal method for acquiring and investing funds. Calculation of capital budgeting involves
different methods. NPV, IRR, Payback Period, profitability index, return on investment these are the methods
which are used in evaluation of the project.
II.REVIEW OF LITERATURE
Rao Cherukuri (1996) done a poll of 77 Indian firms' capital budgeting practices and discovered that 48% of them
utilized IRR as their major development assessment criterion. Interest expense and Payback were utilized as
additional selection factors by the firms. 70% of the firms employed a terminal value of between 14 and 17
percent, whereas 38% of the consultant firms the financial leverage as a discount rate. The relevance of Loan
Term and ARR as major techniques of impact assessment is diminishing, according to this assessment.
P K Sahu (1989) investigated how firms in Bhubaneswar use budgetary control strategies. He discovered that
firms financed regular investments through internal sources of money, but companies sustained growth
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investments through long - term finance, data from a survey of 15 companies. In comparison to modern DCF
approaches such as Internal Rate of Return and Net Present Value, he discovered that conventional PBP and ARR
were the most chosen methods among corporations.
III.RESEARCH METHODOLOGY
The term "research methodology" refers to a researcher's methodical endeavor to learn about the subject under
study. This is a methodical approach to present the problem, and it is a crucial part of the study without which a
researcher may be unable to gather data from employees. The major information for the project analysis was
gathered through unstructured conversations with the finance department. The secondary sources of data are
annual reports, brochures, newspapers and web.
IV. NEED OF THE STUDY
To conduct a financial analysis of numerous capital investment projects in order to select the best option
among a number of alternatives.
To Examine the plan for growth.
V. SCOPE
Capital budgeting is a long-term process, and long-term investments can provide positive returns over
time.
Capital budgeting has a direct impact on a firm ’s profitability.
VI. OBJECTIVES
To analyze the strategies & to control the capital expenditure.
To analyze and choose the projects that are profitable.
VII. METHODOLOGY
SAMPLING TECHNIQUE
Convenient and random sampling techniques are used.
SAMPLE SIZE
5 different investments are selected as sample size from DTDC which are located at Hyderabad in Telangana.
DATA COLLECTION
Primary Data
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The data that is directly collected from firm’s people. It is an important data during a study on capital budgeting.
It is in the form of discussions with employees. The data is collected through Interaction with managing
executive,Interaction with franchiser, interaction with chief managing officer.
Secondary Data
The data which is collected from publishers and newspapers is called secondary data. Unpublished sources include
publications, prior research, corporate manuals, and annual reports. The collected data is presented in table
format. The data is collected throughCapital budgeting manual of DTDC,Broachers,Newspapers.
STATISTICAL TECHNIQUE
IRR, NPV, Payback period, Profitability Index, return on investment, methods are used to analyze the data
collected.
VIII. LIMITATIONS
• Study period is limited.
• All capital budgeting approaches assume that the different investment plans under consideration are mutually
exclusive, which may not be the case in some cases.
IX.DATA ANALYSIS & INTERPRETATION
Study on real-time project
PROJECT –1 at franchisee Chandha Nagar.
PROJECT COST OF
INVESTMENTS/OUTFLOWS
(In Hundreds)
Project 1 at chandha Nagar 4015
V.1
Project 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 TOTAL
1 1000 1600 1300 1300 1100 1500 1200 1400 1500 1100 13000
V.2
Calculating Depreciation as per the Income Tax Act is 35% for first year and 15% written down from second
year onwards, Tax rate @35%
Calculating of NPV, IRR, payback period, Profitability Index, return on investment.
Project
YEARS
PBDT DEPR PBT TAX@35% PAT CFAT CCFAT
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2011
1000 1204.50 -204.50 -47.0350 -157.46 1047.03 1047.03
2012
1600 281.05 1318.95 303.35 1015.59 1296.64 2343.67
2013
1300 252.94 1047.06 240.8238 806.23 1059.17 3402.85
2014
1300 227.65 1072.35 246.6405 825.70 1053.35 4456.21
2015
1100 204.88 895.12 205.8776 689.24 894.12 5350.33
2016
1500 184.39 1315.61 302.5903 1013.01 1197.40 6547.74
2017
1200 165.95 1034.05 237.8315 796.21 962.16 7509.91
2018
1400 149.36 1250.64 287.6472 962.99 1112.35 8622.26
2019
1500 134.42 1365.58 314.0834 1051.49 1185.91 9808.18
2020
1100 120.98 979.02 225.1746 753.84 874.82 10683.00
Total
13000 2926.12 10073.88 2316.99 7756.88 10683.00 59771.22
V.3
YEAR CFAT Total
PV
(CFAT*PV@10%)
Total PV
(CFAT*PV@24%)
CCFAT
2011
1047.03
951.85
844.43 1047.03
2012
1296.64
1071.54
843.33 2343.67
2013
1059.17 795.75 555.53 3402.85
2014
1053.35 719.44 445.57 4456.21
2015
894.12 555.16 304.98 5350.33
2016
1197.40 675.93 329.40 6547.74
2017
962.16 493.78 213.40 7509.91
2018
1112.35 518.91 198.99 8622.26
2019
1185.91 502.94 171.12 9808.18
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2020
874.82 337.24 101.82 10683.00
TOTAL
10683.00 6622.59 4008.63 59771.22
When PV=10%
Cash outflow=4015, Cash inflow= 6622.59
NPV=Inflow-Cash outflow
NPV@10 percent = 2607.59
Since we got Positive NPV we need to increase PV factor
PV=24PV=10
outflow=4015 outflow= 4015
inflow=4008.63inflow= 6622.59
Diff= -6.37 Diff= 2607.59
(+) NPV= (+) Diff= 2607.59
Diff between inflows= 6622.59 -4008.63=2613.96
(+) NPV
IRR = Low Rate + ------------------------------------------ * (Higher PV – Lower PV)
Diff in calculated values of inflows
IRR=24+(2607.59/2613.96) *14
IRR=24+0.99*14
IRR=37.86%
Payback period
base period + (Investment or outflow -CCFAT)
Payback period = -------------------------------------------------------------------
succeeding CCFAT
Inflow or investment=4015
Search 4015 in CCFAT and lease least close one
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Here
4015 is close to 3402 but not 4456
Its corresponding year is 3 and hence base period is 3
Base period=3
CCFAT= 3402.85
Next CCFAT=4456.21
Investment=4015
Payback period=3+(4015- 3402.85)/4456.21
3+612.15/4456.21
3+0.137
Payback period 3 years and 1 month
Profitability index
Total current value of inflow of the cash
-------------------------------------------------------
Total Outflows or investment
6622.59
------------
4015
PI=1.645
Investment on Return
Return on investment=(Avg Inflow*100)
---------------------------
Cost of Outlay
= (22000/10)
---------------------------* 100
4015
= 54
ROI=54%
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V.1
INTERPRETATION
From the above plot we can observe the following things:
Cashflows after tax are not uniformly increasing, they don’t follow either ascending or descending order .
It is observed that when we continuously increase PV from 10 then we get negative NPV where
PV=24%
PV@10 are also not uniform
However, we know that the cumulative cashflows after tax will increase as the time goes On.
X. FINDINGS
The study's findings are divided into three sections. They are,
1. Organizing investment decisions and formulating them.
2. Techniques of assessment and the process of implementing investment choices into action.
3. Analysis between projected and actual investment decisions.
Organizing investment decisions and formulating them:
Depending on the type of investment, the source of proposal genesis differs.
The government takes the initiative to advance the interests of various groups.
The most important elements that affect the formation of an investment plan for a new franchisee is:
a. Investment .
b. People’s interests when compared with other courier platforms.
c. Population of that area.
d. Economy of the people in the respective area.
Motivation, it is a powerful factor in the creation of investing ideas.
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Franchisee formulation is a time-consuming and difficult procedure. It necessitates a great deal of thought
and planning.
Techniques of assessment and the process of implementing investment choices into action
a. technical assessment is made before investing.
b. During expansion assessments is made on technology process, availability of human resource.
c. Market analysis is made and accordingly investment decisions are taken.
Analysis between projected and actual investment decisions:
Since studies are made after investigating all aspects of the firms' activities the projected decisions are so close
the decisions taken in real life projects.
XI. SUGGESTIONS
Whether tactical or strategic, investment decisions should be considered and approved at the firm level.
Franchisee management at various levels should have a full grasp of investment decisions.
To assist with the many concerns of customer complaints, a standing committee comprised of several cadres
of management and a few workers may be formed. This will increase interaction of customers with company
When analyzing future possibilities and forming assumptions, extreme caution should be exercised.
There may be a longer time lag in making investment choices in cooperatives as there are more external
restrictions on cooperative investments. This is a critical problem that has to be investigated further
XII. CONCLUSION
The DTDC research is being carried out using capital budgeting tools. This capital budgeting software assisted
in determining the firm's revenues. The firm's profit cannot be put out without capital budgeting tools. via data
analysis and interpretation, we came to know that NPV is significant because it provides a clear estimate of the
project's financial benefit to shareholders. Payback provides an indicator of a project's risk as well as its liquidity.
The Profitability Index (PI) assesses a project's profitability in relation to its cost. As a consequence, determining
a firm's return is simple when employing this tool.
XIII. BIBLIOGRAPHY
Journals
Rao Cherukuri (1996). capital budgeting practices: A comparative study of India and select southeast Asian
Countries. ASCI journal of management.
P k Sahu (1989), Capital Budgeting in Corporate Sector, Discovery Publishing House, Delhi.
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Vol12, Issue3, 2021
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Books:
The capital budgeting decision.
Dream Dare Deliver.
Capital budgeting and investment analysis.
websites
www.dtdc.com
www.finanace.com
www.dtdc.in
