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CITY CNG

STATION
alimba@live.com
Capital Budgeting
of
Managing Director
Syed Abrar Zaidi
Senior R&D officer
M. ALI HASSAN
Chief Accountant
Hassan Bashir
Syed Abrar Zaidi 35%
M. Ali Hassan 35%
Hassan Bashir 30%
To be a model utility, providing quality
Services by maintaining a high level of ethical
And professional standards and through the
Optimum use of resources
To meet the energy requirements of
Customers through reliable, environment
Friendly and sustainable supply of CNG,
While conducting company business
Professionally, efficiently, ethically and
With responsibility to all our stake holders,
Community and the nation.
MAJOR ACTIVITIES OF THE
PROJECT
1. Search and Purchase of suitable land
2. License from OGRA
3. NOC from TMA
4. Agreement with SNGPL
6. Agreement with WAPDA
7. Import of CNG Plant
8. Construction of UNIT
9. Installation of Plant
10.Hiring Human Resource
11.Start of Filling the Cartridges
No Human Resource * Persons Work Hrs. Salary/Month
1 Manager 1 8 10,000
2 Accountant 1 8 8,000
3 Cashier 1 8 6,000
4 Fillers 6 8 4,000
5 Supervisors 1 8 4,000
6 Machine operators 2 12 5,000
7 Car screen cleaner 2 8 3,000
8 Sweeper (On Contract) 2 8 2,000
9 Gunman 2 12 4,000
Human Resource
* Note: all employees are on the duty of 8 hours shift in a day, and
there are three shifts in a single day.
CAPITAL
BUDGETING
The process of evaluating and
selecting the long term
investments that are consistent
with the firms goal of maximizing
owners wealth.
IMPLEMENTATION
OF
PROJECT MANAGEMENT
Activities Of The CNG Pump Launching Project

ACTIVITY DESCRIPTION Normal cost (Rs)

A Search and Purchase of suitable land 100 lac
B License from OGRA 25 lac
C NOC from TMA 10 lac
D Agreement with SNGPL 50 lac
E Agreement with WAPDA 5 lac
F Import of CNG Plant 145 lac
G Construction of Building 30 lac
H Installation of Plant 5 lac
I Hiring Human Resource 1 lac
J Start of Filling the Cartridges
The Implementation Plan

Time duration
Approximately two years
Cost
Approximately 40 Million Rupees
INSTALLED COST OF NEW CNG STATION
Purchase of land [Rs250000x40 Marla] 100,00,000
Building construction cost 30,00,000
Equipment cost 145,00,000
Installation cost 5,00,000
Installed cost of new asset 280,00,000
Agreement securities 90,00,000
Hiring of HR 1,00,000
Initial
investment....371,00,000

REVENUES
Avg. No of Cars = 500 cars/day
Avg. CNG filled = 200Rs
Per day revenue = 100000
Total revenue = 36000000
Description
Rs. Rs.
Revenues
36000000
Less: Operative Expenses-------------

Gas Bill
16,600,000
Utilities

900,000
Salaries to employees
960,000
Electricity bills

2,880,000
CITY CNG STATION
Projected Income Statement
For the end of 1st Year
Site Expanse
1,640,000
Repair & maintenance
100,000
Labor messing
160,000
Advertisement
150,000
Stationary
10,000
Total Expenses (23400000)
Profit 12600000
Operating cash flows
The incremental after tax cash
inflows resulting from
implementation of a project during its
life
CITY CNG STATION
OPERATING CASH FLOWS
Year 1 2 3 4 5 6
Revenues 36000000 39600000 43560000 47916000 52707600 57978360
-Expenses (23400000) (25740000) (28314000) (31145400) (34259940) (37685934)
EBDT 12600000 13860000 15246000 16770600 18447660 20292426
-
Depreciation
(5600000) (8960000) (5320000) (3360000) (3360000) (1400000)
NPBT 7000000 4900000 9926000 13410600 15087660 18892426
-Tax (20%) (1400000) (980000) (1985200) (2682120) (3017532) (3778485)
NPAT 5600000 3920000 7940800 10728480 12070128 15113941
+
Depreciation
5600000 8960000 5320000 3360000 3360000 1400000
Cash Flows 11200000 12880000 13260800 14088480 15430128 16513941
Payback period
The amount of time required to
recover its initial investment from
cash inflows of a proposed project
CITY CNG STATION
Payback Period

Year
Cash Flows Balance Payback
Period
0
(371,00,000) (371,00,000)

1
11200000 (25900000)
1
2
12880000 (13020000)
1
3
13260800 NIL
.98
4
14088480
5
15430128
6
16513941
Payback
Period
2.98 Years

Payback Period = 2 Years , 11 Months and 23 days

Net present value
A sophisticated capital budgeting
technique found by subtracting a
profits initial investment from the
present value of its cash inflows
discounted at rate equal to the firms
cash of capital
CITY CNG STATION

NPV (Net Present Value) & IRR (Internal Rate of Return)


Years Cash
Flows
PVIF
(10%)
NPV PVIF
(20%)
NPV PVIF
(30%)
NPV
0
(371,00,00
0)
1.000 (371,00,0
00)
1.000 (371,00,0
00)
1.000 (371,00,
000)
1
11200000
.909 10180800 .833 9329600 .769 8612800
2
12880000
.826 10638880 .694 8938720 ..592 7624960
3
13260800
.751 9958861 .579 6391706 .455 6033664
4
14088480
.683 9622432 .482 6790647 .350 4930968
5
15430128
.621 9582111 .402 6202911 .269 4150704
6
16513941
.564 9313863 .335 5532170 .207 3418386
NPV 22196946 6085754 (232851
8)
Internal rate of return(IRR)
The discount rate that equate the NPV
with zero
CITY CNG STATION
INTERNAL RATE OF RETURN (IRR)

IRR = 20% + [20% / 20% -- 30% * 30% -- 20%]

IRR = 20% + [6085754/6085754 + 2328518 * 10%]

IRR = 20% + [6085754/8414272 * 10%]

IRR = 20% + [0.7232 *10%]

IRR = 20%+ 7.232

IRR = 27.232%