ASSESEMENT
BY SHAIK .BUDESAHEB
BY Shaik Budesaheb
INTRODUCTION
Orange pulp is a relatively new company providing high quality non-alcoholic beverages in the
local market. Orange pulp intends to focus on the flavor itself. Our target markets will primarily
constitute the corporate and working class who appreciate good quality .and who constitute a
large portion of the market, to administrative personnel appreciative of good quality. The people
can be able to fulfill their thirst.
Financial planning
Financial planning is the process of meeting your life goals through the proper management of
your finances. One’s goals can include saving for a major purchase, education planning or
planning for retirement. The financial planning process consists of several steps that help you
take a "snap shot" of where you are today and what you need to do financially to accomplish
your goals. The process involves gathering relevant financial information, setting life goals,
examining your current financial status and coming up with a strategy or plan for how you can
meet your goals given your current situation and future plans.
Cost of capital
The overall percentage cost of the funds used to finance a firm's assets. Cost of capital is a
composite cost of the individual sources of funds including common stock, debt, preferred stock,
and retained earnings. The overall cost of capital depends on the cost of each source and the
proportion that source represents of all capital used by the firm. The goal of an individual or
business is to limit investment to assets that provide a return that is higher than the cost of the
capital that was used to finance those assets.
2
The overall expenses of the orange pulp company are as follow:
The month wise estimated expenses for the subsidiary are given below:
3
4
Using method of least square:
Price per
unit in
Indian
Month(X) Rupees X2 XY
(Y)
1 274 1 274
2 272 4 544
3 274 9 822
4 275 16 1100
5 273 25 1365
6 272 36 1632
7 270 49 1890
8 272 64 2176
9 274 81 2466
10 270 100 2700
11 278 121 3058
12 275 144 3300
13 277 169 3601
14 281 196 3934
Sum = 105 3837 1015 28862
5
Total values
X = 105
Y = 3,837
X * X = 1015
X * Y = 28,862
n = 14 (number of month's)
A=
∑ Y −B ∑ X
n
n ∑ xy−∑ x ∑ y
B=
n ∑ 2−¿ ¿
x
14∗28862−105∗3837
¿
14∗1015−1052
= 14 * 28,862 - 105*3,837
14 * 1015 - (105)2
= 404068 – 402885
14210 – 11025
= 1183
3185
B = 0.37
6
A= ΣY - BΣX
N N
3837 - 38.955
14 14
274.071 - 2.7825
271.2885
A = 271.2885
A = 271.29
Y = A + BX
A= 271.29
B= 0.37
7
Got the values of x and y
If X Y
X=15 276.84
X=16 277.226
X=17 277.597
X=18 277.968
X=19 278.339
X=20 278.71
X=21 279.081
X=22 279.452
X=23 279.823
X=24 280.194
X=25 280.565
X=26 280.936
X=27 281.307
8
282
281
280
279
278
277
276
275
274
0 2 4 6 8 10 12 14
Total average of X = 13
Price = 279.0798462
Goods produced during the month are delivered at the end of the month and as per the agreement
with the buyer, the company shall receive the sales amount only after five months.
9
10 15
Maturity 5 years years years
10
Short term req. 3.99
Balance Long term 5.99
retained earnings 3 16.38%
A/c receivable 0 15.00%
Shares 3 16.38%
Total 14
OVERALL COST OF CAPITAL 15.02%
Trial=3
amount borrowed 9 14%
9473.68
number of bonds 4
Round of 9500
P+I 2.23
for 6
Expenses mos 2
Total Expenditure 4.23
Short term req. 4.23
Balance Long term 5.23
retained earnings 3 16.38%
A/c receivable 0 15.00%
Shares 2.23 16.38%
Total 14.23
OVERALL COST OF
CAPITAL 14.87%
Trial=4
amount borrowed 10 14%
number of bonds 10526.32
Round
of 10600
P+I 2.484
11
Expense for 6
s mos 2
Total Expenditure 4.484
Short term req. 4.484
Balance Long term 4.484
retained earnings 3 16.38%
A/c receivable 0 15.00%
Shares 1.484 16.38%
Total 14.484
OVERALL COST OF CAPITAL 14.74%
12
Trial=5
amount borrowed 11 14%
11578.94
number of bonds 7
Round
of 11580
P+I 2.7212
Expense for 6
s mos 2
Total Expenditure 4.7212
Short term req. 4.7212
Balance 3.7212
16.38
retained earnings 3 %
15.00
A/c receivable 0 %
16.38
Shares 0.7212 %
Total 14.7212
14.60
OVERALL COST OF CAPITAL %
Trial=6
amount
borrowed 12 14%
12631.5
number of bonds 8
Round
of 12700
P+I 2.978
Expense for 6
s mos 2
Total
Expenditure 4.978
Short term req. 4.978
Balance 2.978
retained earnings 2.978 16.38
13
%
15.00
A/c receivable 0 %
16.38
Shares 0 %
Total 14.978
14.47
OVERALL COST OF CAPITAL %
14
Trial=7
amount borrowed 13 14%
13684.2
number of bonds 1
Round of 13700
P+I 3.218
for 6
Expenses mos 2
Total Expenditure 5.218
Short term req. 5.218
Balance 2.218
16.38
retained earnings 2.218 %
15.00
A/c receivable 0 %
16.38
Shares 0 %
Total 15.218
OVERALL COST OF 14.35
CAPITAL %
Trial=8
amount
borrowed 14 14%
14736.8
number of bonds 4
Round
of 14800
P+I 3.472
Expense for 6
s mos 2
Total Expenditure 5.472
Short term req. 5.472
Balance 1.472
retained earnings 1.472 16.38%
A/c receivable 0 15.00%
15
Shares 0 16.38%
Total 15.472
OVERALL COST OF CAPITAL 14.23%
16
Trial=9
amount borrowed 15 14%
15789.47
number of bonds 4
Round
of 15800
P+I 3.712
Expense for 6
s mos 2
Total Expenditure 5.712
Short term req. 5.712
Balance 0.712
16.38
retained earnings 0.712 %
15.00
A/c receivable 0 %
16.38
Shares 0 %
Total 15.712
14.11
OVERALL COST OF CAPITAL %
Trial=10
amount
borrowed 16 14%
16842.1
number of bonds 1
Round
of 16900
P+I 3.966
Expense for 6
s mos 2
Total
Expenditure 5.966
Short term req. 5.966
Balance 0
retained earnings 0 16.38
17
%
15.00
A/c receivable 0 %
16.38
Shares 0 %
Total 16
14.00
OVERALL COST OF CAPITAL %
18
Debt COC Debt Total Capital
7 15.16% 7 13.736
8 15.02% 8 14
9 14.87% 9 14.23
10 14.74% 10 14.484
11 14.60% 11 14.7212
12 14.47% 12 14.978
13 14.35% 13 15.218
14 14.23% 14 15.472
15 14.11% 15 15.712
16 14% 16 16
17 14% 17 17
18 14.00% 18 18
19 14.00% 19 19
COC
15.40%
15.20%
15.00%
14.80%
14.60% COC
14.40%
14.20%
14.00%
13.80%
13.60%
13.40%
6 8 10 12 14 16 18 20
19
Total Capital
20
19
18
17 Total Capital
16
15
14
13
7 9 11 13 15 17 19 21
Funding Required:
Sources of Funds:
20
total amount =15.712
overall cost of
Capital=14.11%
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ORANGE PULP COMPANY
Hyderabad-500053
Andrapradesh, India.
September 8, 2010
Mr. .KASI
Guntur
India-02
Dear Mr.RAMU
I’m glad we had chance to talk last week regarding the planning for the new soft drink company.
I am writing to give you the estimated savings you will realize if you select this product .which is
very new to the market with the new flavor. Analyzing the present market products, I was able to
calculate your financial profits of the first year.
In order to supply this product to the market we need to have the all the expenses in making the
product it will be approximately 10 corers to start and produce in the market.
I estimated that you will regain the cost of your deposit in the 6th month of the year, and with the
cost of capital of 14.25% and in addition, the new flavor in the soft drink you are planning would
receive the advantage of the more products in the market without the cost of extension because
you would already be providing for the future by your current investment.
We believe we can offer you the best financial plan. I’ll call you early next week to sea if you
will need any further information. In the meantime, if you have any questions, please contact me
at 9703370331
Yours,
V.KASI
Hyderabad.
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