Project Appraisal, Financing

and Control
Fly Ash Bricks Manufacturing :
Assignment on Financial Projections

Submitted to:

Submitted By:

Dr. Anuj Verma

Jyoti Shahi (037/2015)

Aman Pandey(042/2015)
Ranjit Paul (047/2015)

Introduction
Fly Ash bricks are made of fly ash, lime, gypsum and sand. These can be extensively used in all building
constructional activities similar to that of common burnt clay bricks. The fly ash bricks are
comparatively lighter in weight and stronger than common clay bricks. Since fly ash is being
accumulated as waste material in large quantity near thermal power plants and creating serious
environmental pollution problems, its utilisation as main raw material in the manufacture of bricks will
not only create ample opportunities for its proper and useful disposal but also help in environmental
pollution control to a greater extent in the surrounding areas of power plants. In view of superior quality
and eco-friendly nature, and government support the demand for Fly Ash Bricks has picked up.
Process of Manufacture
Fly Ash, Virgin Lime, Sand and Gypsum are manually fed into a pan mixer where water is added in the
required proportion for intimate mixing. The proportion of the raw material is generally in the ratio 6070% of Fly Ash, 10-20% Virgin Lime, 10% Gypsum and 10% Sand, depending upon the quality of raw
materials. After mixing, the mixture is shifted to the hydraulic/mechanical presses. The bricks are
carried on wooden pellets to the open area where they are dried and water cured for approximately 15 to
20 days. The bricks are then tested and sorted before dispatch.
Cost of Project and Means of Finance
The cost of the project is estimated at Rs 31.97 Lakhs as follows :
(Rs In Lakhs)
Land and Site development
Building
Fixed Chimney
Pump-Set and Equipment
Preliminary expenses
Contingency Margin
Working capital margin

8
4
9
4
2
1.5
3.47
31.97

The proposed means of finance for the project are as follows :

(Rs In Lakhs)
Contributed capital
Term loans
State Govt. Loan

5
22
4.97
31.97

Basic Assumptions

The construction period will last for 1 year.

The installed capacity of the unit is 6000 lots per annum. One lot of bricks equals 1000 bricks.
So, at 100% utilisation, the unit can produce 6 million units of Fly Ash bricks.

The expected capacity utilisation will be 70% in the first year. Thereafter, every year the
utilisation will be increased by 5% until it reaches full utilisation.

The average sales realisation of a single lot of Fly Ash will be INR 3600.

The cost of Fly Ash will be 5% of sales; the cost of Sand will be 24% of sales; for Gypsum, it
will be 21% of sales; while for Virgin Lime, it will be 5% of sales. Also the cost of power will be
8% of sales.

Wages and Salaries are expected to be INR 9 Lakhs for the first year. From next year onwards, it
will grow by an annual rate of 3% every year.

Factory overhead expenses will be INR 50000 for the first year. They will increase at the rate of
6% per year subsequently.

Administration expenses will be INR 650000nper year.

Selling expenses will be 3% of sales.

The Term Loan will be repaid in 10 equal annual instalments, with the first instalment falling
due at the end of second operating year. The applicable interest rate is 13%

Current Asset requirement are expected to be as follows :

Fly Ash
Sand
Gypsum
VirginLime
Book Debts

1 month
1 month
1 month
1 month
0.5 month

The suppliers of raw materials will provide trade credit for 36 days.

The Depreciation rates are provided below :

Depreciation SLM

Depreciation WDV

Building

3.5%

Building

10%

Fixed Chimney

7.0%

Fixed Chimney

15%

Pump Set and Equipment

7.0%

Pump Set and Equipment

15%

The bank finance for working capital will cost 16%.

The preliminiary expenses may be written off by 8% every year.

The income tax rate applicable is 30%.

Using the above information we need to prepare the profitability estimates, the projected cash flow
estimates, and the projected balance sheets.
Alongside also prepare :

Interest payment schedule,

Working Capital Requirements, and

Depreciation schedule

Exhibit 1 : Interest on Term Loan

year
1
2
3
4
5
6
7
8
9
10

Loan o/s at the beginning of year

22.00
22.00
19.80
17.60
15.40
13.20
11.00
8.80
6.60
4.40

Interest for the year (Rs

In Lakhs)
2.86
2.86
2.57
2.29
2.00
1.72
1.43
1.14
0.86
0.57

Loan o/s at the end of year

22.00
19.80
17.60
15.40
13.20
11.00
8.80
6.60
4.40
2.20

Exhibit 2 : Working Capital Requirements

Items

1. Fly Ash
2. Sand
3. Gypsum
4. Virgin Lime
5. Book debts
Total Current Assets
Less Margin W.C from
long term Sources
( 25% of Total asset)
Less Trade Credit for
Raw Materials and
Consumables stores
Bank Finance for W.C.
Interest
16%

Norms in
Months
1
1
1
1
0.5

10

63000
302400
264600
126000
630000

67500
324000
283500
135000
675000

72000
345600
302400
144000
720000

76500
367200
321300
153000
765000

81000
388800
340200
162000
810000

85500
410400
359100
171000
855000

90000
432000
378000
180000
900000

90000
432000
378000
180000
900000

90000
432000
378000
180000
900000

90000
432000
378000
180000
900000

1386000 1485000 1584000 1683000 1782000 1881000 1980000 1980000 1980000 1980000

346500

371250

396000 420750 445500

470250 495000 495000 495000 495000

894773
144727
23156

958685 1022597 1086510 1150422 1214334 1278247 1278247 1278247 1278247

155065 165403 175740 186078 196416 206753 206753 206753 206753
24810 26464 28118 29772 31427 33081 33081 33081 33081

Exhibit 3 : Depreciation Schedules

A. Asset Valuation for depriciation purposes

Basic
Cost

Asset Expenses

Share of
contigency margin

Total (in Rs Lakhs)

Land

0.48

8.48

Building

0.24

4.24

Fixed Chimney

0.54

9.54

Pump Set and Equipment

0.24

4.24

B. depriciation schedule for Company Law Purposes( SLM)

Building
Fixed Chimney
Pump Set
and Equipment
Annual depreciation

1
0.15
0.67

2
0.15
0.67

3
0.15
0.67

4
0.15
0.67

5
0.15
0.67

6
0.15
0.67

7
0.15
0.67

8
0.15
0.67

(Rs In Lakhs)
9
10
0.15
0.15
0.67
0.67

0.30
1.11

0.30
1.11

0.30
1.11

0.30
1.11

0.30
1.11

0.30
1.11

0.30
1.11

0.30
1.11

0.30
1.11

0.30
1.11

C.Depriciation Schedule for income tax purpose (W.D.V)

Building
Fixed Chimney and
Pump Set
and Equipment
Annual depreciation

1
0.42

2
0.38

3
0.34

4
0.31

5
0.28

6
0.25

7
0.23

8
0.20

(Rs In Lakhs)
9
10
0.18
0.16

2.07
2.49

1.76
2.14

1.49
1.84

1.27
1.58

1.08
1.36

0.92
1.17

0.78
1.00

0.66
0.87

0.56
0.75

0.48
0.64

Exhibit 4 : Profibility Estimates

Years

10

Profitability statement
Installed capacity(lots per annum)
Production(lots per annum)
Capacity Utilization
A Sales Realization
B Cost of Production
- Raw Materials
Fly Ash
Sand
Gypsum
Virgin Lime
- Power
- Wages and Salaries
- factory overheads
C Aministration and
selling Expenses
- Administration Expenses
- Selling Expenses
D Gross Profit Before interest

6000
4200
70%

6000
4500
75%

6000
4800
80%

6000
5100
85%

6000
5400
90%

6000
5700
95%

6000
6000
100%

6000
6000
100%

6000
6000
100%

6000
6000
100%

15120000.00 16200000.00 17280000.00 18360000.00 19440000.00 20520000.00 21600000.00 21600000.00 21600000.00 21600000.00

756000.00
3628800.00
3175200.00
1512000.00
1209600.00
1200000.00
50000.00

810000.00
3888000.00
3402000.00
1620000.00
1296000.00
1236000.00
53000.00

864000.00
4147200.00
3628800.00
1728000.00
1382400.00
1273080.00
56180.00

918000.00
4406400.00
3855600.00
1836000.00
1468800.00
1311272.40
59550.80

972000.00
4665600.00
4082400.00
1944000.00
1555200.00
1350610.57
63123.85

1026000.00
4924800.00
4309200.00
2052000.00
1641600.00
1391128.89
66911.28

1080000.00
5184000.00
4536000.00
2160000.00
1728000.00
1432862.76
70925.96

1080000.00
5184000.00
4536000.00
2160000.00
1728000.00
1475848.64
75181.51

1080000.00
5184000.00
4536000.00
2160000.00
1728000.00
1520124.10
79692.40

1080000.00
5184000.00
4536000.00
2160000.00
1728000.00
1565727.82
84473.95

650000
650000
650000
650000
650000
650000
650000
650000
650000
650000
453600.00 486000.00 518400.00 550800.00 583200.00 615600.00 648000.00 648000.00 648000.00 648000.00
2484800.00 2759000.00 3031940.00 3303576.80 3573865.58 3842759.83 4110211.29 4062969.85 4014183.50 3963798.23

E Total Financial Expenses

- Interest on term loans
- Interest on bank borrowings

286000.00
23156.38

286000.00
24810.41

257400.00
26464.44

228800.00
28118.47

200200.00
29772.49

171600.00
31426.52

143000.00
33080.55

114400.00
33080.55

85800.00
33080.55

57200.00
33080.55

F Depriciation

111300.00

111300.00

111300.00

111300.00

111300.00

111300.00

111300.00

111300.00

111300.00

111300.00

G Operating Profit
H Preliminary Expenses Written Off
I Profit/ Loss Before Tax
J Provision For Tax
K Profit After Tax
L Less Dividend
M Retained profit
N Add: Depriciation
Preliminary Expenses Written Off
O Net Cash Accounts

2064343.62 2336889.59 2636775.56 2935358.33 3232593.09 3528433.31 3822830.74 3804189.30 3784002.95 3762217.68
16000

16000

16000

16000

16000

16000

16000

16000

16000

16000

2048343.62 2320889.59 2620775.56 2919358.33 3216593.09 3512433.31 3806830.74 3788189.30 3768002.95 3746217.68
573163.08

665500.38

764517.24

861842.73

957652.73 1052094.79 1145292.25 1143883.87 1141418.20 1137964.75

1475180.53 1655389.21 1856258.32 2057515.61 2258940.36 2460338.52 2661538.49 2644305.43 2626584.75 2608252.93
0

1475180.53 1655389.21 1856258.32 2057515.61 2258940.36 2460338.52 2661538.49 2644305.43 2626584.75 2608252.93
111300.00
16000

111300.00
16000

111300.00
16000

111300.00
16000

111300.00
16000

111300.00
16000

111300.00
16000

111300.00
16000

111300.00
16000

111300.00
16000

1602480.53 1782689.21 1983558.32 2184815.61 2386240.36 2587638.52 2788838.49 2771605.43 2753884.75 2735552.93

Exhibit 5 : Tax Calculation

10

Profit / loss
before Tax

2048343.62 2320889.59 2620775.56 2919358.33 3216593.09 3512433.31 3806830.74 3788189.30 3768002.95 3746217.68

Add: Dep.
(SLM / CLB)
TOTAL

111300.00 111300.00 111300.00 111300.00 111300.00 111300.00 111300.00 111300.00 111300.00 111300.00
2159643.62 2432189.59 2732075.56 3030658.33 3327893.09 3623733.31 3918130.74 3899489.30 3879302.95 3857517.68

Less: Dep
Tax purpose

249100.00

Profit/Loss

213855.00

183684.75

157849.24

135717.33

116750.66

100489.90

86543.07

74575.60

64301.85

1910543.62 2218334.59 2548390.81 2872809.10 3192175.75 3506982.65 3817640.84 3812946.23 3804727.35 3793215.83

less Unabsorbed
Dep.
Total Income
Income tax @30
percent of
total income

1910543.62 2218334.59 2548390.81 2872809.10 3192175.75 3506982.65 3817640.84 3812946.23 3804727.35 3793215.83

30%

573163.08

665500.38

764517.24

861842.73

957652.73 1052094.79 1145292.25 1143883.87 1141418.20 1137964.75

Exhibit 6 : Projected Cash Flow Statements

Years

10

Sources of Funds
- Share issue
- Profit before taxation
with interest add back
- Depriciation
- Preliminary expenses
written off
- Increase in secured medium
and long term borrowings
- Increase in Bank borrowings
for working Capital
- Interest in the state Govt's
Special incentive loan

TOTAL (A)

500000
2357500.00 2631700.00 2904640.00 3176276.80 3446565.58 3715459.83 3982911.29 3935669.85 3886883.50 3836498.23
111300.00 111300.00 111300.00 111300.00 111300.00 111300.00 111300.00 111300.00 111300.00 111300.00
16000

16000

16000

16000

16000

16000

16000

144727.40 10337.67 10337.67 10337.67

10337.67

10337.67

10337.67

0.00

0.00

0.00

16000

16000

16000

2200000

497000
3197000.00 2629527.40 2769337.67 3042277.67 3313914.47 3584203.25 3853097.50 4120548.96 4062969.85 4014183.50 3963798.23

Disposition of Funds
- Capital expenditure of
for the project
- Increase in working capital
- Preliminary expenses
- Decrease in Secured medium
and long term borrowings
- Interest on term loans
- Interest on bank borrowings
for Working Capital
- Taxation
- Dividend

TOTAL (B)
- Opening balance of cash
in hand and at bank
- Net surplus/deficit A-B
- Closing balance of cash in
hand and at bank

2650000.00
35087.67

35087.67

0.00

0.00

0.00

220000
220000 220000 220000 220000
286000.00 286000.00 257400.00 228800.00 200200.00 171600.00
23156.38 24810.41 26464.44 28118.47 29772.49 31426.52

220000
143000.00
33080.55

220000
114400.00
33080.55

220000
85800.00
33080.55

220000
57200.00
33080.55

491227.40 35087.67 35087.67 35087.67

35087.67

200000

573163.08 665500.38 764517.24 861842.73 957652.73 1052094.79 1145292.25 1143883.87 1141418.20 1137964.75
0
0
0
0
0
0
0
0
0
2850000.00 1373546.87 1231398.46 1303469.35 1373848.87 1442712.89 1510208.99 1576460.47 1511364.42 1480298.75 1448245.30

0.00 347000.00 1602980.53 3140919.74 4879728.06 6819793.67 8961284.03 11304172.54 13848261.03 16399866.47 18933751.21
347000.00 1255980.53 1537939.21 1738808.32 1940065.61 2141490.36 2342888.52 2544088.49 2551605.43 2533884.75 2515552.93
347000.00 1602980.53 3140919.74 4879728.06 6819793.67 8961284.03 11304172.54 13848261.03 16399866.47 18933751.21 21449304.15

Exhibit 7 : Projected Balance Sheets

Years

10

Liabilities
- Share Capital
- Reserve and Surplus
- Secured loans
:Term loans
: Working capital adv.
- Unsecured loans
: State Govt. loan
- Current liabilities and
Provisions
: Trade credit

500000

500000 500000 500000

500000
500000
500000
500000
500000
500000
500000
1475180.53 3130569.74 4986828.06 7044343.67 9303284.03 11763622.54 14425161.03 17069466.47 19696051.21 22304304.15

2200000.00 2200000.00 1980000.00 1760000.00 1540000.00 1320000.00 1100000.00 880000.00 660000.00 440000.00 220000.00
144727.40 155065.07 165402.74 175740.41 186078.08 196415.75 206753.42 206753.42 206753.42 206753.42
497000

497000

497000

497000

497000

497000

497000

497000

497000

497000

497000

894772.60 958684.93 1022597.26 1086509.59 1150421.92 1214334.25 1278246.58 1278246.58 1278246.58 1278246.58

TOTAL

3197000.00 5711680.53 7221319.74 8931828.06 10843593.67 12956784.03 15271372.54 17787161.03 20211466.47 22618051.21 25006304.15

Assets
- Fixed Assets
: Gross Block
: Less accumulated
Depriciation
: Net Fixed Assets
- Investments
- Current Assets, loans
and advances
: Fly Ash
: Sand
: Gypsum
: Virgin Lime
: Book Debts
: Cash and bank balance
- Miscellaneous Expenditure
and Losses
: Preliminary expenses

2650000.00 2650000.00 2650000.00 2650000.00 2650000.00 2650000.00 2650000.00 2650000.00 2650000.00 2650000.00 2650000.00
0.00 111300.00 222600.00 333900.00 445200.00 556500.00 667800.00 779100.00 890400.00 1001700.00 1113000.00
2650000.00 2538700.00 2427400.00 2316100.00 2204800.00 2093500.00 1982200.00 1870900.00 1759600.00 1648300.00 1537000.00

63000.00
302400.00
264600.00
126000.00
630000.00
347000.00 1602980.53

67500.00
324000.00
283500.00
135000.00
675000.00
3140919.74

72000.00
345600.00
302400.00
144000.00
720000.00
4879728.06

76500.00
367200.00
321300.00
153000.00
765000.00
6819793.67

81000.00
388800.00
340200.00
162000.00
810000.00
8961284.03

85500.00
410400.00
359100.00
171000.00
855000.00
11304172.54

90000.00
432000.00
378000.00
180000.00
900000.00
13848261.03

90000.00
432000.00
378000.00
180000.00
900000.00
16399866.47

90000.00
432000.00
378000.00
180000.00
900000.00
18933751.21

90000.00
432000.00
378000.00
180000.00
900000.00
21449304.15

200000 184000.00 168000.00 152000.00 136000.00 120000.00 104000.00

88000.00

72000.00

56000.00

40000.00

8%

TOTAL

3197000.00 5711680.53 7221319.74 8931828.06 10843593.67 12956784.03 15271372.54 17787161.03 20211466.47 22618051.21 25006304.15