INTRODUCTION

CAPITAL BUDGEING:
An emcent aocaton of capta s the most mportant nance functon
n modern tmes. It nvoves decsons to commt rms funds to ong-term
assets. Such decsons are tend to determne the vaue of company/rm by
nuencng ts growth, protabty & rsk.
Investment decsons are generay known as capta budgetng or
capta expendture decsons. It s cever decsons to nvest current n ong
term assets expectng ong-term benets rms nvestment decsons woud
generay ncude expanson, acquston, modernzaton and repacement of
ong-term assets.
Such decsons can be nvestment decsons, nancng decsons or
operatng decsons. Investment decsons dea wth nvestment of
organzatons resources n Long tern (xed) Assets and / or Short term
(Current) Assets. Decsons pertanng to nvestment n Short term Assets fa
under "Workng Capta Management". Decsons pertanng to nvestment n
Long term Assets are cassed as "Capta Budgetng" decsons.
Capta budgetng decsons are reated to aocaton of nvestbe funds to
dherent ong-term assets. They have ong-term mpcatons and ahect the
future growth and protabty of the rm.
In evauatng such nvestment proposas, t s mportant to carefuy consder
the expected benets of nvestment aganst the expenses assocated wth t.
Organzatons are frequenty faced wth Capta Budgetng decsons. Any
decson that requres the use of resources s a capta budgetng decsons.
Capta budgetng s more or ess a contnuous process n any growng
concern.
NEED FOR THE STUDY

The Pro|ect study s undertaken to anayze and understand the
Capta Budgetng process n cement manufacturng sector,
whch gves mean exposure to practca mpcaton of theory
knowedge.
To know about the companys operaton of usng varous Capta
Budgetng technques.
To know how the company gets funds from varous resources.

OBJECTIVES OF THE STUDY
To study the reevance of capta budgetng n evauatng the pro|ect
for pro|ect nance
To study the technque of capta budgetng for decson- makng.
To measure the present vaue of rupee nvested.
To understand an tem wse study of the company nanca
performance of the company.
To make suggeston f any for mprovng the nanca poston f the
company.
To understand the practca usage of capta budgetng technques
To understand the nature of rsk and uncertanty

METHODOLOGY
To acheve aforesad ob|ectve the foowng methodoogy has been
adopted. The nformaton for ths report has been coected through the
prmary and secondary sources.
Primary sour!s

It s aso caed as rst handed nformaton; the data s coected
through the observaton n the organzaton and ntervew wth omcas. By
askng queston wth the accounts and other persons n the nanca
department. A part from these some nformaton s coected through the
semnars, whch were hed by PEPSICO
S!o"#ary sour!s
The secondary data have been coected through the varous
books, magaznes, brouchers & webstes
LIMITATION OF THE STUDY :
Lack of tme s another mtng factor, e., the schedue perod of 8
weeks are not sumcent to make the study ndependenty regardng
Capta Budgetng n PEPSICO.
The busy schedue of the omcas n the PEPSICOs another mtng
factor. Due to the busy schedue omcas restrcted me to coect the
compete nformaton about organzaton.
Non-avaabty of condenta nanca data.
The study s conducted n a short perod, whch was not detaed n a
aspects.
A the technques of capta budgetng are not used n PEPSICO.
Therefore t was possbe to expan ony few methods of capta
budgetng.
INDUSTRY PROFILE
INTRODUCTION OF CEMENT:
The basc need of human beng s food cothng and sheter ove and
ahecton /possesson s on never endng process for a human beng.
As the tme passes on human bengs ther wants and wshes aso
changed from ancent tmes to modern tmes and among them the vng
pattern and costructon works aso have been changed from temporary
constructon of house to permanent constructon and the basc matera used
n constructon s "Cement".
Cement the word derved from a atn word CEMENTTUM means stone
chppng such as we used n roman.
Cement the word as per oxford, t s commony used s any substance
apped for soft stockng thngs. But cement means s most vta and
mportant matera for modern constructons. It s a matera whch sets and
hardness when mxed wth water. Cement s bascay used n constructon
as a budng agent. In ancent tmes cay brcks and stones have been used
for constructon works.
The Romans were usng a bndng or a cementng matera that woud
harden and water. The rst systematc ehort was made by "SMEATON" who
undertook the executon of a new ght house n 1756. He observed that
producton obtaned by durng me stone was the best cementng matera
for work under water.
The constructon n ost centures was wth Lme that was the man
equpment used for constructon work. The ancent constructons ke
Ta|maha, Outubmnar, Mysore Paace, Red fort, Charmnar etc., the evdence
of me constructon.
THE INDIAN CEMENT INDUSTRY:
By starng prducton n 1914 the story of Inda cement ndustry s a
stage of contnuous of growth.
Inda s the fourth argest cement producer after Chna, |apan and
U.S.A. so far annua producton and demand has been growng a pace at
roughy 68 mon tons wth an nstaed capacty of 82 mons tons.
In 1914 as the foundaton of stabe cement Industry was ad as sun
above. It was Indan Cement Company at Porbandar n Gu|arat. In 1920, the
cement marketng corporaton was formed to promote the sae and
dstrbuton of cement. A sgncant deveopment was made n 1930 when a
manufacturers mergers together to form the Assocated Cement Company
Lmted.
Cement Industry s the ma|or Industry t has taken rapd strdes for a
modest begnnng at porbandar n 1914 to the 1980s wth over
understandng out of the 60 unts, 14 unts are n the pubc sectors
remanng unts are n prvate sector.
Indan endowed wth cement grade me stones (90 Bon tons ) and
coa (190 Bon tons ). The basc raw matera requred for cement
manufacture and sef sumcent n manufacturng cement makng
machneres. Durng nnetes t had a partcuar mpressve expanson wth a
growth rate of 10%.
The strength and vtaty of cement Industry can be gouged by the
ntrest shown and support gven by Word Bank, consderng the exceent
performance of the ndustry n utzng oans and achevng the ob|ectves
and targets. The Word Bank s examne the feasbty of provdng a thrd
ne of credt for further upgradng Industry n varyng areas, whch w make
t goba.
Therefore, Inda today totay nstaed capacty of over 30 mon tons,
empoyng over a 100 thousand peope drecty and contrbutng amount of
rupees 8 bon to Indas GDP.
TECHNOLOGY:
Cement may be manufactured empoyng three aternatve
technooges.
1. The argey out moded we process technoogy.
2. The more modern dry process that requres ony 19% coa
utzaton.
3. The atest percanator technoogy through whch optmum
utzaton may be acheved. Here the cacnatory or raw.
Matera s party or competed carred out before the feud enters the rotator
kn besdes savng power, the adopton of ths technoogy enabe n ncrease
n nstaed capacty by 30-35%, the 30,000 tons per day pants beng setup
n the country use ths technoogy.
TECHNOLOGICAL CHANGES:
Contnuous technoogca upgradng and assmaton of atest
technoogy has been gong on n the cement ndustry. Presenty 93% of the
tota capacty n the ndustry s based on modern and envronment frendy
dry process technoogy and ony 7% of the capacty s based on od wet and
sem-dry process technoogy.
There s tremendous scope for waste heat recovery n cement pants
and there by reducton n emsson eve. One pro|ect for co-generaton of
power utzng waste heat n an Insan cement pant s beng mpemented
wth |apanese assstance under Green Ad Pan. The nducton of advanced
technoogy has heped the ndustry mmensey to conserve energy and fue
and to save materas substantay.
Inda s aso producng dherent varetes of cement ke Ordnary Portand
Cement (OPC), Portand Puzzng Cement (PPC), Portand Bast Furnace Sag
Cement (PBFS), O We Cement, Rapd Hardenng Portand Cement, Suphate
Resstng Portand Cement, Whte Cement etc. producton of these varetes
of cement conform to the BIS Speccatons. Aso, some cement pants have
set up dedcated |ettes for promotng buk transportaton and export.
TOTAL PRODUCTION:
The cement ndustry comprses of 125 arge cement pants wth an
nstaed capacty of 148.28 mon tons and more than 300 mn cement
pants wth an estmated capacty of 11.10 mon tons per annum. The
Cement Corporaton of Inda, whch s a Centra Pubc Sector Undertakng,
has 10 unts. There are 10 arge cement pants owned by varous state
Governments. The tota nstaed capacty n the country as a whoe s 159.38
mon tons.
Actua cement producton n 2004-05 was 116.35 mon tons as
aganst a producton of 107.90 mon tons n 2003-04, regsterng a growth
rate of 8.84%. Ma|or payers n cement producton are Ambu|a cement,
Adtya cement, | K Cement and L & T cement.
Apart from meetng the entre domestc demand, the ndustry s aso
exportng cement and cnker. The export of cement durng 2003-04 and
2005-06 was 5.14 mon tons and 6.92 mon tons respectvey. Export
durng Apr-May, 2005 was 1.35 mon tons. Ma|or exporters were Gu|arat
Ambu|a Cements Ltd. and L & T Ltd.
The pannng commsson for the formuaton of X Fve Year Pan
consttuted a Workng Group on Cement Industry for the deveopment of
cement ndustry. The Workng Group has dented foowng thrust areas for
mprovng demand for cement;
1. Further push to housng deveopments programs;
2. Promoton of concrete Hghways and roads, and
3. Use of ready-mx concrete n arge nfrastructure pro|ects.
Cement ndustry has been decontroed from prce and dstrbuton on 1
st
march 1989 and de-censed on 25
th
|uy 1991. However, the performance
of the ndustry and prces of cement are montored reguary. Beng a key
nfrastructure ndustry, the constrants faced by the
Actua cement producton n 2004-05 was 116.35 mon tons as
aganst a producton of 107.90 mon tons n 2003-04, regsterng a growth
rate of 8.84%. Ma|or payers n cement producton are Ambu|a cement,
Adtya cement, | K Cement and L & T cement.
Apart from meetng the entre domestc demand, the ndustry s aso
exportng cement and cnker. The export of cement durng 2003-04 and
2005-06 was 5.14 mon tons and 6.92 mon tons respectvey. Export
durng Apr-May, 2005 was 1.35 mon tons. Ma|or exporters were Gu|arat
Ambu|a Cements Ltd. and L & T Ltd.
The pannng commsson for the formuaton of X Fve Year Pan
consttuted a Workng Group on Cement Industry for the deveopment of
cement ndustry. The Workng Group has dented foowng thrust areas for
mprovng demand for cement;
4. Further push to housng deveopments programs;
5. Promoton of concrete Hghways and roads, and
6. Use of ready-mx concrete n arge nfrastructure pro|ects.
Cement ndustry has been decontroed from prce and dstrbuton on 1
st
march 1989 and de-censed on 25
th
|uy 1991. However, the performance of
the ndustry and prces of cement are montored reguary. Beng a key
nfrastructure ndustry, the constrants faced by the ndustry are revewed n
the Infrastructure Coordnaton Commttee meetngs hed n the Cabnet
Secretarat under the Charmanshp of Secretary (Coordnaton). The 444
Commttee on Infrastructure aso revews ts performance.
DISTRIBUTION SYSTEM:
Dstrbuton of cement was entrey under Government contro unt
1982. at present the Industry has to make an agreement towards the evy
quota whch s to be sod compusory to the Government the rest of the
output or open market quota may be sod n the open market evoved prces
the output fted by the Government s aocated state wse.
NEED AND IMPORTANCE:
In Inda we see rapd ndustra deveopment n the ast few centures.
Indan ndustry s growng at consderabe rato whch reveas Inda s a
deveopng country. And there are dherent ndustra sectors are payng a
vta roe for the economys deveopment. They are stee cement SOF.
Informaton Technoogy Medca Scence etc.
One among them was "CEMENT INDUSTRY" whch pays a vta roe for
the countrys deveopment. In Inda cement ndustry s growng ratonay
and marketng s the kng pn of a actvtes partcuary to the busness
because of ths changes n the externa envronment .e., soca, potca,
ega, technca and nternatona envronment and changes n marketng.
There s ncreased n the saares n a most n every market eadng to
competton s aspects of prce, promoton etc., whch hep to ncrease the
standard of vng of peope.
The manufacturers of Cement ke Pepsco cement, Inda mted, Orent
mted, Utratech etc. are provdng cement and they are dstrbutng cement
through wde network of deaers.
Pepsco cements are dong ts busness from decades and t s
contnuousy contrbutng to the natona economy. In even Industry now a
days there s no speca nterest for partcuary department ke producton or
manufacturng but know a days tota quaty management pays a vta for
the companys success.
Dstrbuton channe whch pays a vta roe for the company success.
Dstrbuton channes are nk between the company and consumers.
CHAPTER $
COMPANY PROFILE
PROFILE OF THE COMPANY
One among the ndustra gans n the country today servng the naton on
the ndustra front pepsco ndustres mted has a tenured and extent fu
hstory datng hock to the twentes when the ndustra house of Bras
enqured t.Wth ony a Texte m under ts banner n 1924,t grew from
strength and spread ts actvtes to newer eds ke Rayon pup Transparent
Paper.Spun ppes and Refectory Tyres o ms and renery Extracton.
Lookng to the wde gap between the demand and suppy of vta
commodty cement whch t pays on mportant roe n Naton Budng, the
government Prvate entrepreneurs to argument the cement producton
Pepsco rose to the occason and decded to set up few cement pants n the
country.
Pepsco cement s one of the prestgous unts n the renowned
Pepsco ndustres group that s one of Indas eaden ndustra
congomerates, under the eadershp of Mr.B.K.Bra, the famous personaty
of Indan Industry, who owes branches a over Inda.
Pepsco cement Industry s one of the eadng manufactures of cement n
Inda Pepsco cement s a dvson of Pepsco Industres mted. It s a dry
process cement pant. It s ocated at Basant Nagar n Karmnagar Dstrct of
Andhra Pradesh wth the pant capacty s 8.26 akhs tones per annum. It s
8Kms away from the Ramagundam Raway Staton Lnng Madras to New
Deh.
PLANTS SETUP:
The first cement point of Pepsico with a capacity of 2.1 lacks tones per annum
incorporating Humboldts suspension preheated system was committed during the year 1969.
The second unt was setup n the year 1971 wth capacty of 2.1acks
tons whch added to the above pant capactes.
The thrd pant wth a capacty of 2.5acks tons per anum, whch
went on stream n the year 1978.
The coa for ths company s obtaned by sngaren coeres and the
power s obtaned from APSEB. The power demand capacty for the factory s
about 21M.W. Pepsco has got 20G sets of 4MN each nstaed n the
year1987.
Pepsco cement beongs to the Bra group companes one of the
ndustra gants n the country.
Pepsco cement ndustres dstngushed t sef among the cement
factores n Inda by baggng the natona productvty award for two
successve years .e., n 1985-86 and 87. Pepsco cement aso got the FAPCCI
award for best famy pannng ehort n the state for the year 1987-88.
Pepsco aso bagged NCBCNS natona award for energy
conservaton for the year 1989-90. The Pepsco ndustres ook for the
wefare of the empoyees and t provde varous factes whch the
empoyees and t provde varous factes whch the empoyee fees satsed
wth n the organzaton and after the work they fees satses the worker and
works fames by provdng varous wefare schemes and by provdng
recreatona factes of a gace.

The company set up "Recreaton Cub" for the purpose of recrmnaton
factes two audtorums are provded for payng ndoor games ke chess,
shutte and caroms and for organzng cutura functons and actvtes ke
drama, musc, and dance centers etc.
It provdes Lbrary and readng rooms for the benet of the
empoyees more than 5000 books are avaabe n the brary aong wth
other Newspapers and magaznes.
They setup Engsh and Teugu medum schoos for the growth of workers
chd. The company provdes "Dspensary" wth a quaed medca oher and
Medca stah for the benet of the empoyees.
A House |ourna n the name of Basant Nagar sam char s brought out
quartery where an a mportant actvtes and nformaton of the pant s
pubshed.
The company provdes cooperatve stores where the suppy essenta
commodtes ke rce, wheat, sugar, kerosene etc. at cash and credt bass.
They conduct games for twce a year on the occason of 26
th
|anuary
Repubc Day and 15
th
August Independence Day n order to encourage the
empoyees, outsde of ther workstaton.
The famy pannng camps are hed reguary wth the hep of the
Dstrct Medca and Heath Authortes at the Government Hospta. It has got
on award for ther exceent servce.
Not ony the empoyees of the factory are taken care, butthe
company pays a ot of attenton towards the rura deveopment actvtes.
Tweve vages are adopted and the company has extended hep n
constructng tempes, road, and gvng programmers to the farmers, Eye
surgca camps heath checkup schemes etc.
To keep the ecoogca baance, company has aso undertaken massve
tree pantaton n and around Basant Nagar and near by vages there by
emnatng the pouton and they have been nomnated by the government
of Inda for "VRUKSHAMITRA AWARD" but ehort of an ndustra unt n the
state for rura deveopment 1994-95 presented by CM n march 1996.
BRANDS:
Pepsco brands wth namey Bra Supreme and Bra supreme god (53
grades) has made a nche wth outstandng quaty and commands a
premum n the market. The atest oherng, "Bra Shakth" s aso very we
receved and s the most sought oher brand now.
PEPSICOS CAREER:
Pepsco has an outstandng track record. Achevng 100% capacty
utzaton n productvty and energy conservaton. It has provded ts
dstnctons by baggng severa awards of natona and state eve are worthy.
A%ARDS:
Natona productvty award for 1985-86.
Natona productvty award for 1986-87.
Natona award for energy conservaton for 1980-90.
Natona award for mnes safey 1985-86, 1986-87.
Prestgous state award ya|amanya ratna and but management
award for the year 1980.
Best FAPCCI award for but famy pannng ehort n the state
1987-88.
FAPCCI award for best workers wefare 1995-96.
Best ndustra productvty award of FAPCCI.
Best management award of state government 1993.
It has got "Vanamtra award" from the government of Andhra
Pradesh.

PEPSICO GROUP OF INDUSTRIES
a)Textes Pepsco Industres Ltd,
42, Garden Reach Road
Cacutta-700034.
b)Rayon Pepsco Rayon Trenna (P.O.),
Dst : Hoogy, West Benga.

c)Spun Ppes Pepsco Spun ppes & Foundres,
bansbera (P.O.), Dst: Hoogy,
West Benga.
d)Cement Pepsco Cement,
Basantnagar-506187,
Dst : Karmnagar, Andhra Pradesh
e)Cement Vasavadatta Cement,
Sedam-585222,
Dst : Gubargah, Karnataka.
f) Tyres Bra Tyres,
Shvam Chambers,
53, Syed Amr A Avenue.
Cacutta-700029.
Pro#u& Pro'(!
The man brands of cement manufactured are:
RAASI GOLD (53 Grade)
RAASI SUPER POWER
RAASI 43 Grade cement.
A the brands are known for ts best quaty standards.
Huma" R!sour!s
The Pant has we quaed, hghy motvated manpower of 649 empoyees
on ts ros. Out of 649 empoyees, 92 are executve cadre and remanng are
n stah and workmen cadre. The KIL, KNR manpower s known for ther sprt
and commtment.
Po((u&io" Co"&ro(
The Pant s commssoned for pouton free envronment and nstaed a the
requred pouton contro equpment as per the statutory requrement. A
separate team w reguary montor and mantan the sad equpment.
Sa)!&y
The Pant mantans hgh standards of safety and good housekeepng
methods n ne wth 5S technques.
Co"&ri*u&io" &o &+! !,+!-u!r
KIL, KNR has been contrbutng around Rs.175.00 crores to the exchequer n
the form of taxes, royaty etc.
To."s+i/
KIL, KNR has a we panned townshp consstng of 378 quarters havng
factes ke
Schoo
Hospta
Tempe
Guest House
Co-operatve Stores
Recreaton Cub
Pay Ground etc.
Rura( D!0!(o/m!"&
KIL, KNR as apart of Rura & Soca Deveopment Programme adopted 8
surroundng vages . The company extends the factes ke
Housng
Water
Schoo
Od age penson
Roads etc;
By aocatng a budget amount of about Rs.25.00 akhs per
annum.
Industrial Relations
KIL,KNR s known for ts best Industra Reatons practces n ths regon and
won many awards from Govt. of A.P. and Chamber of Industres.
Norms
Raw M Cnker Cement
Lme stone 96%
Iron ore 2.5%
Laterte 1.5%
Raw M 1.5 tonnes
Coa 20%
Cnker97%
Gypsum 3%
CONCEPTUAL FRAME1%OR2
CAPITAL BUDGEING:
An emcent aocaton of capta s the most mportant nance functon
n modern tmes. It nvoves decsons to commt rms funds to ong-term
assets. Such decsons are tend to determne the vaue of company/rm by
nuencng ts growth, protabty & rsk.
Investment decsons are generay known as capta budgetng or
capta expendture decsons. It s cever decsons to nvest current n ong
term assets expectng ong-term benets rms nvestment decsons woud
generay ncude expanson, acquston, modernzaton and repacement of
ong-term assets.
Such decsons can be nvestment decsons, nancng decsons or
operatng decsons. Investment decsons dea wth nvestment of
organzatons resources n Long tern (xed) Assets and / or Short term
(Current) Assets. Decsons pertanng to nvestment n Short term Assets fa
under "Workng Capta Management". Decsons pertanng to nvestment n
Long term Assets are cassed as "Capta Budgetng" decsons.
Capta budgetng decsons are reated to aocaton of nvestbe funds to
dherent ong-term assets. They have ong-term mpcatons and ahect the
future growth and protabty of the rm.
In evauatng such nvestment proposas, t s mportant to carefuy consder
the expected benets of nvestment aganst the expenses assocated wth
t.Organzatons are frequenty faced wth Capta Budgetng decsons. Any
decson that requres the use of resources s a capta budgetng decsons.
Capta budgetng s more or ess a contnuous process n any growng
concern.
For E,am/(!: Purchase of Land s an exampe of Capta Budgetng decson.
Smary repacement of outdated equpment wth modern machnes,
purchase of a brand or busness, computerzaton and networkng the
organzaton, nvestment n research and deveopment of a product aunch
of a ma|or promotona campagn etc are a exampe of Capta Budgetng
decsons.
However, n a cases, the decsons have a ong-term mpact on the
performance of the organzaton. Even a snge wrong decson may n
danger the exstence of the rm as a protabe entty.
IMPORTANCE OF CAPITAL BUDGETING:
There are severa factors that make capta budgetng decsons among the
crtca decsons to be taken by the management. The mportance of capta
budgetng can be understood from the foowng aspects of capta budgetng
decsons.
1. Lo"3 T!rm Im/(ia&io"s: Capta Budgetng decsons have ong term
ehects on the rsk and return composton of the rm. These decsons
ahect the future poston of the rm to a consderabe extent. The
nance manger s aso commttng to the future needs for funds of that
pro|ect.
45 Su*s&a"&ia( Commi&m!"&s: The capta budgetng decsons
generay nvove arge commtment of funds. As a resut, substanta
porton of capta funds s bocked.
$5 Irr!0!rsi*(! D!isio"s: Most of the capta budgetng decsons are
rreversbe decsons. Once taken the rm may not be n a poston to
revert back uness t s ready to absorb heavy osses whch may resut
due to abandonng a pro|ect mdway.
65 A)&!r &+! Ca/ai&y a"# S&r!"3&+ &o Com/!&!: Capta budgetng
decsons ahect the capacty and strength of a rm to face competton.
A rm may oose compettveness f the decson to modernze s
deayed.
PROBLEMS 7 DIFFICULTIES IN CAPITAL BUDGETING:
85 Fu&ur! u"!r&ai"&y: Capta Budgetng decsons nvove ong-term
commtments. There s ot of uncertanty n the ong term. The
uncertanty may be wth reference to cost of the pro|ect, future
expected returns, future competton, ega provsons, potca
stuaton etc.
1. Tim! E(!m!"&: The mpcatons of a Capta Budgetng decson are
scattered over a ong perod. The cost and benets of a decson may
occur at dherent pont of tme. The cost of a pro|ect s ncurred
mmedatey. However, the nvestment s recovered over a number of
years. The future benets have to be ad|usted to make them comparabe
wth the cost. Longer the tme perod nvoved, greater woud be the
uncertanty.
$5 Di9u(&y i" :ua"&i'a&io" o) Im/a&: The nance manger may
face dmcutes n measurng the cost and benets of pro|ects n
quanttatve terms.
E,am/(!: The new product proposed to be aunched by a rm may
resut n ncrease or decrease n saes of other products aready beng
sod by the same rm. It s very dmcut to ascertan the extent of
mpact as the saes of other products may aso be nuenced by factors
other than the aunch of the new product.
ASSUMPTIONS IN CAPITAL BUDGETING:
The Capta Budgetng decson process s a mut-faceted and anaytca
process. A number of assumptons are requred to be made.
85 C!r&ai"&y .i&+ r!s/!& &o os& 7 B!"!'&s: It s very dmcut to
estmate the cost and benets of a proposa beyond 2-3 years n
future.
45 Pro'& Mo&i0! : Another assumpton s that the capta budgetng
decsons are taken wth a prmary motve of ncreasng the prot of
the rm.
T+! a&i0i&i!s a" *! (is&!# as )o((o.s:
Ds-nvestments .e., sae of dvson or busness.
Change n methods of saes dstrbuton.
Undertakngs an advertsement campagn.
Research & Deveopment programs.
Launchng new pro|ects.
Dverscaton.
Cost reducton.
FEATURES OF INVESTMENT DECISIONS:
The exchange of current funds for future benets.
The funds are nvested n ong-term assets.
The future benets w occur to the rm over a seres of years.
IMPORTANT OF INVESTMENT DECISIONS:
They nuence the rms growth n ong run.
They ehect the rsk of the rm.
They nvove commtment of arge amount of funds.
They are rreversbe, or reversbe at substanta oss.
They are among the most dmcut decsons to make.
TYPE OF INVESTMENT DECISIONS:
Expanson of exstng busness.
Expanson of new busness.
Repacement & Modernzaton.
INVESTMENT EVALUATION CRITERIA:
Estmaton of cash ows.
Estmaton of the requred rate of return.
Appcaton of a decson rue for makng the choce.
Consderaton of cash ows s to determne true protabty of the pro|ect
and t s an unambguous way of dentfyng good pro|ects from the poo.
Rankng s possbe t shoud recognze the fact that bgger cash ows are
preferabe to smaer ones & eary cash ows are referabe to ater ones I
shoud hep to choose among mutuay excusve pro|ects that whch
maxmzes the sharehoders weath. It shoud be a crteron whch s
appcabe to any consderabe nvestment pro|ect ndependent of
other.There are number of technques that are n use n practce. The chart
of technques can be outned as foows:
Ca/i&a( Bu#3!&i"3 T!+"i-u!s:
Tra#i&io"a( A//roa+ Mo#!r" A//roa+
;or< ;or<
No"1Disou"&!# Cas+ F(o.s Diso""!&!# Cas+ F(o.s
Pay Back Perod (PB) Net Present Vaue (NPV)
Accounting Rate of Return (ARR) Internal Rate of Return
Protabty Index (PI)
Dscounted Payabe Perod
NET PRESENT VALUE :
The Net Present vaue method s a cassc economc method of
evauatng the nvestment proposas. It s one of the methods of dscounted
cash ow. It recognzes the mportance of tme vaue of money".
It correcty postuates that cash ows arsng of dherent tme perod,
dher n vaue and are comparabe ony when ther equvaent .e., present
vaues are found out.
T+! )o((o.i"3 s&!/s ar! i"0o(0!# i" &+! a(u(a&io" o) NPV:
Cash ows of the nvestment pro|ect shoud be forecasted based on
reastc assumptons.
An approprate rate of nterest shoud be seected to dscount the cash
ows, generay ths w be the " Cost of capta rate" of the company.
The present vaue of nows and out ows of an nvestment proposa,
has to be computed by dscountng them wth an approprate cost of
capta rate.
The Net Present vaue s the dherence between the "Present Vaue of
Cash nows" and the present vaue of cash outows.
Net present vaue shoud be found out by subtractng present vaue of
cash outows from present vaue of cash nows. The pro|ect shoud be
accepted f NPV s postve.
NPV = Pr!s!"& Va(u! o) Cas+ i">o. ? Pr!s!"& 0a(u! o) &+! as+
ou&>o.
A!/&a"! Ru(!:
Accept f NPV > 0
Re|ect f NPV < 0
May accept f NPV = 0
One wth hgher NPV s seected.
INTERNAL RATE OF RETURN METHOD:
The nterna rate of return (IRR) method s another dscounted cash
ow technque .Ths method s based on the prncpe of present vaue. It
takes nto account of the magntude & tmng of cash ows.
IRR nothng but the rate of nterest that equates the present vaue of
future perodc net cash ows, wth the present vaue of the capta
nvestment expendture requred to undertake a pro|ect.
The concept of nterna rate of return s qute smpe to understand n
the case of one-perod pro|ect.
A!/&a"! Ru(!:
Accept f r > k
Re|ect f r < k
May accept f r = k
where r = rate return
k = opportunty cost of capta
PROFITABILITY INDE@ ;OR< BENEFIT COST RATIO:
Yet another tme-ad|usted method of evauatng the nvestment
proposas s the benet-cost (B/C) rato of protabty ndex PI). It s benet
cost rato. It s rato of present vaue of future net cash nows at the
requred rate of return, to the nta cash outow of the nvestment.
Pr!s!"& Va(u! o) Cas+ i">o.s
PI = 11111111111111111111111111111111111111111
Pr!s!"& Va(u! o) Cas+ ou&>o.s
A!/&a"! Ru(! :
Accept f PI > 1
Re|ect f PI < 1
May accept f PI = 1
Protabty Index s a reatve measure of pro|ects protabty.
PAY BAC2 PERIODE METHOD:
One of the top concerns of any person or organzaton nvestng a arge
amount of money woud be the tme by whch the money w come back.
The concern makng the nvestment woud want that at east the capta
nvested s recovered as eary as possbe. The pay back perod s dened
as the perod requred for the proposas cumuatve cash ows to be equa
to ts cash outows. In other words, the payback perod s the ength of
tme requred to recover the nta cost of the pro|ect. The payback perod
s usuay stated n terms of number of years. It can aso be stated as the
perod requred for a proposa to break even on ts net nvestment.
The payback perod s the number of years t takes the rm to recover ts
orgna nvestment by net returns before deprecaton, but after taxes.
If pro|ect generates constant annua cash nows, the pay back perod s
competed as foows:
I"i&ia( I"0!s&m!"&
Pay BaA = 111111111111111111111111
A""ua( as+ i">o.
In case of unequa cash nows, the payback perod can be found out
by addng up the cash nows unt the tota s equa to nta cash outay.
Acceptance Rue:
Accept f cacuated vaue s ess than standard xed by management
otherwse re|ect t.
If the payback perod cacuated for a pro|ect s ess than the
maxmum payback perod set up by the company t can be accepted.
As a rankng method t gves hghest rank to a pro|ect whch has owest
pay back perod, and owest rank to a pro|ect wth hghest pay back
perod.
DISCOUNTED PAY BAC2 PERIOD:
One of the serous ob|ectons to pay back method s that t does not
dscount the cash ows. Hence dscounted pay back perod has come nto
exstence. The number of perods taken n recoverng the nvestment outay
on the present vaue bass s caed the dscounted pay back perod.
Dscounted Pay Back rue s better as t does dscount the cash ows unt
the outay s recovered.

ACCOUNTING RATE OF RETURN ;OR<
AVERAGE RATE OF RETURN ;ARR< :
It s aso known as return on nvestment (ROI). It s an accountng method,
whch uses the accountng nformaton reveaed by the nanca statements
to measure the protabty of an nvestment proposa. Accordng to
Soomon, ARR on an nvestment can be cacuated as " the rato of
accountng net ncome to the nta nvestment .e." .
A0!ra3! N!& I"om!
ARR = 111111111111111111111111111
A0!ra3! I"0!s&m!"&
Average Income = Average of after tax prot
Average Investment = Haf of Orgna Investment
A!/&a"! Ru(!:
Accept f cacuated rate s hgher than mnmum rate estabshed by
the management.
It can re|ect the pro|ects wth an ARR ower than the expected rate of
return.
Ths method can aso hep, the management to rank the proposas on
the bass of ARR.
A hghest rank w be gven to a pro|ect wth hghest ARR, whereas a
owest rank to a pro|ect wth owest ARR.
CAPITAL BUDGETING METHODS IN PRACTICE
In a study of the capta budgetng practces of fourteen medum to
arge sze companes n Inda, t was found tat amost a companes
used by back.
Wth pay back and/or other technques, about 2/3
rd
of companes used
IRR and about 2/5
th
NPV. IRR s found to be second most popuar
method.
Pay back ganed sgncance because of s smpcty to use &
understand, ts emphass on the eary recovery of nvestment & focus
on rsk.
It was found that 1/3
rd
of companes aways nssted on computaton of
pay back for a pro|ects, 1/3
rd
for ma|orty of pro|ects & remanng for
some of the pro|ects.
Reasons for secondary of DCF technques n Inda ncuded dmcuty n
understandng & usng threes technques, ack of quaed
professonas & unwngness of top management to use DCF
technques.
One arge manufacturng and marketng organzaton mentoned that
condtons of ts busness were such that DCF technques were not
needed.
Yet another company stated that repacement pro|ects were very
frequent n the company, and t was not consdered necessary to use
DCF technques for evauatng such pro|ects. technques n Inda
ncuded dmcuty n understandng & usng threes technques, ack of
quaed professonas & unwngness of top management to use DCF
technques.
PROCESS
CAPITAL BUDGETING PROCESS:
Ateast ve phases of capta expendture pannng & contro can be
dented:
Identcaton ( or Organzaton ) of nvestment opportuntes.
Deveopment of forecasts of benets and costs.
Evauaton of the net benets.
Authorzaton for progressng and spendng capta expendture.
Contro of capta pro|ects.
INVESTMENT IDEAS:
Investment opportuntes have to be dented or created nvestment
proposas arse at dherent eves wthn a rm.
Na&ur! o) I#!a L!0!(
Cost reducton ------
Repacement Pant Leve
Process/Product Deveopment ( 50% n Inda cover ths eve)
Expanson Top management
Dverscaton In Inda, t s nsgncant
New Product Marketng Dept., ( or) Pant Manager
Repacng an od
Machne ( or)
Improvng the Factory Leve.
Producton technques.
Investment proposas shoud be generated to empoy the rms funds fuy
we & emcenty.
FORECASTING :
Cash ow estmates shoud be deveopment by operatng managers
wth the hep of nance executves. Rsk assocated shoud be propery
handed. Estmaton of cash ows requres coecton and anayss of a
quatatve and quanttatve data, both nanca and non-nanca n nature.
MIS provde such data.
Corr!& &r!a&m!"& s+ou(# *! 3i0!" &o :
Addtona workng capta
Sae proceeds of exstng assets.
Deprecaton
Fnanca ows (to be dstngushed from operaton ows)
EVALUATION :
Group of experts who have no ake to grnd shoud be taken n seectng
the methods of evauaton as NPV, IRR, PI, Pay Back, ARR & Dscounted Pay
Back.
Pay Back perod s used as "Prmary" method & IRR/NPV as
"Secondary" method n Inda. The foowng are to be gven due mportance.
For evauaton, mnmum rate of return or cut-oh s necessary.
Usuay f s computed by means of weghted Average cost of Capta
(WACC)
Opportunty cost of capta shoud be based on rsky ness of cash
ow of nvestment proposas.
Assessment of rsk s an mportant aspect. Senstvty Anayss &
Conservatve for costs are two mportant methods used n Inda.
AUTHORIBATION:
Screenng and seectng may dher from one company to another.
When arge sums are nvoved usuay na approva rests wth top
management. Deegaton of approva authorty may be ehected sub|ect to
the amount of outay. Budgetary contro shoud be rgdy exercsed.
CONTROL AND MONITORY:
A Capta pro|ects reportng system s requred to revew and montor
the performance of nvestment pro|ects after competon and durng ther
fe. Foow up comparson of the actua performance wth orgna estmates
to ensure better forecastng besdes sharpenng the technques for mprovng
future forecasts. As a resut company may re-prase ts pro|ects and take
necessary acton.
Indan Companes use reguar pro|ect reports for controng capta
expendture reports may be quartery, haf-yeary, monthy, b-monthy
contnuous reportng..
Expendture to date
Stage and physca competon
Approved tota cost
Revsed tota cost
DECISION MA2ING LEVEL:
For pannng and contro purpose three eves of Decson makng have been
dented :
Operatng
Admnstratve
Strategc
OPERATING CAPITAL BUDGETING:
Incudes routne mnor expendture, as omce equpment handed by
ower eve management.
ADMINISTRATIVE CAPITAL BUDGETING:
Fas n between these two eves nvoves medum sze nvestments
such as busness handed by mdde eve management.
STRATEGIC CAPITAL BUDGETING:
Invoves arge nvestment as acquston of new busness or expanson
n a new tme of busness, handed by top management unque nature.
Lo"3 T!rm Ca/i&a( Bu#3!&i"3 I" PEPSICO
PRE ? INVESTMNET STAGE:
In a panned economy, as n Inda, the dentcaton of pubc sector
pro|ects needs to be done wthn the overa framework of natona the
sectora pannng. A pro|ects of every sector need to be dented
scentcay at the tme of pan formuaton. In actua practce, however, t s
observed that dentcaton stage s the most negected stage of the pro|ect
pannng.
The ve year pans ndcate the broad strategy of pannng economc
growth rate and other basc ob|ectves to be acheved durng the pan perod.
The macro eve pannng exercse undertaken at the begnnng of every ve
year pan ndcates broady the roe of each sectors physca targets to be
acheved and nanca outays, whch coud be made avaabe for the
deveopment of the sector durng the pan perod.
The dentcaton of a pro|ect n the Fve Year Pan s not the sancton of
the pro|ect for mpementaton. It provdes ony the green sgna for the
preparaton of feasbty report (FR0 for apprasa and nvestment decson.
A premnary scrutny of the FR of the pro|ect s done n the Mnstry and
thereafter copes of the feasbty report are submtted to the apprasng
agences, vz., Pannng Commsson, Bureau of Pubc Enterprses and the
Pan Fnance Dvson of the Mnstry of Fnance.
Thus the organzatona responsbty for dentfyng these pro|ects
rests wth the concerned admnstratve mnstry, n consutaton wth ts
pubc enterprses.
The essenta steps for pro|ect dentcaton and preparaton reates to
studyng () mports () substtutes () avaabe and raw matera (v)
avaabe technoogy and sks (v) nter-ndustry reatonshp (v) exstng
ndustry (v) deveopment pans (v) od pro|ects etc.
It may be mentoned that n actua practce, these steps are hardy
scentcay studed and foowed by the admnstratve mnstry pubc
sector undertakng at the tme of pro|ect dentcaton. The pubc sector
pro|ects many a tme come spontaneousy on the bass of deas and
possbtes of demand or avaabty of some raw materas and not an
outcome of scentc nvestgaton and systematc search for feasbe
pro|ects.
PROJECT FORMULATION :
The second stage of "Pro|ect Cyce" vz. Pro|ect Formuaton, s a pre-
nvestment exercse to determne whether to nvest, where to nvest, when
to nvest and how much to nvest. The pro|ect/feasbty reports are meant
to provde requred nformaton for assessng technca, nanca,
commerca, organzaton and economc vabty of the pro|ect pannng n
Inda, many because of reatvey ate reazaton of ts mportance. As a
resut, the nvestment decsons for arge pro|ects n the past were taken on
haf-baked and -conceved pro|ects and tme-over runs and cost-over runs
of pubc sector pro|ects have become a reguar feature rather than
excepton.
In eary seventes aong wth the settng up of the Pubc Investment Board
(PIB) the Government created a new pro|ect Apprasa Dvson n the
Pannng Commsson. Ths Dvson prepared and crcuated "Gudenes for
preparng Feasbty Reports of Industra Pro|ects" n 1974.
Ths gudenes, unke earer manua, ndcates a the nformaton and data
requred to be presented and anaysed n the feasbty report, so as to
enabe the apprasa agency to carry out () technca anayss - to determne
whether the speccaton of technca parameters are reastc, () nanca
anayss - to determne whether the proposa s nancay vabe, ()
commerca anayss - to determne soundness of the product speccatons,
marketng pans and organzaton structure and (v) economc anayss, to
determne whether a pro|ect s worthwhe from the pont of vew of naton
and economy as a whoe.
The gudenes descrbes n detas, the nformaton requred to be
gven and anaysed on the foowng ssues : (a) genera nformaton of the
sector, (b) ob|ectve of the proposa, (c) aternatve ways, f any of attanng
the ob|ectves and better sutabty of the proposed pro|ect, (d) pro|ect
descrpton - gestaton perod, costs, technoogy proposed, antcpated fe of
the pro|ect etc., (e) demand anayss, tota demand / requrements of the
country, ncudng antcpated mports and exports and share of the proposed
pro|ect, (f) capta costs and norms assumed, actvty wse and year wse,
(g) operatng costs and norms, (h) revenue and benets estmaton etc.
PROJECT APPRAISAL :
The apprasa of the pro|ect foows the formuaton stage. The
ob|ectve of the apprasa process s not ony to decde whether to accept or
re|ect the nvestment proposa, but aso to recommend the ways n whch the
pro|ect can be redesgned or reformuated so as to ensure better technca,
nanca, commerca and economc vabtes.
The pro|ect apprased whch s an essenta too for |udcous
nvestment decsons and pro|ect seecton s a mut-dscpnary task. But
many a tmes ths s consdered doubt, have payed an mportant roe n
contrbutng systematc methods for forecastng the future and evovng
apprasa methods to quantfy socas costs and benets, but they aone can
not carry out compete apprasa of an nvestment proposa.
The need for pro|ect apprasa and nvestment decsons based on
soca protabty arses many because of the basc characterstcs of
deveopng countres mted resources for deveopment and mutpe needs -
ob|ectve of pannng beng Economc Growth wth Soca |ustce. The
pro|ect apprasa s a convenent and comprehensve fashon to acheve, the
ad down ob|ectves of the economc deveopment pan. The apprasa work
presupposes avaabty of a certan mnmum among of reabe and up to
date data n the country, as we as the avaabty of traned persons to
carry out the apprasa anayss.
As stated earer the nvestment decson of pubc sector pro|ects are
requred to be taken wthn the approved pan frame work. The Pro|ect
Apprasa Dvson (PAD) that prepares the comprehensve apprasa note of
pro|ects of Centra Pans was therefore set up n Pannng Commsson. The
Fnance Mnstry ssues expendture sancton for a nvestment proposas
wthn the frame work of annua budget. The pan Fnance Dvson and the
Bureau of Pubc Enterprses of the Fnance Mnstry are aso requred to
examne and gve comments on the nvestment proposas of pubc.
DATA ANALYSIS
A nance actvty commences wth an nvestment proposa, whch cas for a
nanca apprasa of a pro|ect. Here, capta Budgetng has ts roe. Each one
of the pro|ects s apprased on foowng bass"
Cost Estmates.
Cost Generatons.
Cos& Es&ima&!s :1
Feasbty Report of the pro|ect s prepared based on the cost of smar
unts prevang at the tme of preparaton of pro|ects report of the atest
costs are not avaabe, the same shoud be escaated. Coecton of data
wth regard to the cost of the varous equpment shoud from part of a
contnuous pannng so tat a reastc cost estmate s made for the pro|ect
Reports for cv works are generay based on PEPSICO schedue of rates wth
reasonabe premum there on.
Cos& o) G!"!ra&io" :1
The nancng of pubc sector company s generay based on Debt
Equty of 3:1 the genera rate of nterest chargeabe by the centra
Government on oan components s 10.5% ( Now enhanced to 11%) . The
pant fe as provded under the Eectrcty Suppy Act, 1948 s 25 years and
deprecaton based on ths perod has to be cacuated on straght ne
method, on 90% of the cost xed assets. The operaton & mantenance
expenses are generay of the order 2.5% of the capta cost based on the
above assumptons, the cost of generaton coud be worked out dscounted
cash ow bass takng 12% IRR (Interna Rate of Return). Ths rate has been
generay accepted by varous apprasng agences of the power pro|ects.
Feasbty Report based on above methodoogy and ndcatng ste
seecton, coa nkage, power dstrbuton examned by Centra Eectrcty
Authorty n a cases where nvestment s Rs.1 Crore and above. Snce
PEPSICO s pubc sector undertakng, a the nvestment decsons have to be
formay sanctoned by Government after PIBs (Pubc Investment Boards)
cearance.
SHARE CAPITAL :
The entre share capta s owned by Government of Inda. Durng the
Year no addton has been made. However the authorzed capta has been
ncreased from Rs. 80,000 mon to Rs.1,00,000 mon and the face vaue
or share has been spt to Rs.10/- each from Rs.1000/- each.
ROLE OF FINANCE MANAGEMENT IN INVESTMENT
DECISIONS IN PEPSICO:
Fnance Manager s the number of a pro|ect team. He pays an
mportant roe n nvestgaton stage of the pro|ect, when varous
aternatves are anaysed & the most optmum souton s decded upon.
The soundness upon the accuracy of the data & as a nance manager has to
questng and satsfy hmsef on the vadty of the data.
The power pro|ects are extremey capta ntensve and before arge
resources are commtted to a scheme a detaed feasbty study need to be
prepared coverng-
The need of the pro|ect
The demand pro|ectons
The aternatves of the ste ocatons
The broad parameters of the pant and equpment
The cost estmates
The vabty of the scheme.
Cos& Es&ima&!s :- Cost estmates and nanca |ustcaton and returns of
the pro|ects are the areas where nanca management has to pay ts roe.
Cost estmates shoud be prepared by the cost engneers and vetted by the
nance manager. Cost engneerng s a specazed ed & need to be
deveoped n the contest of power pro|ects because of nsumcent cost data
on the components of the pro|ects.
Ths rases an mportant queston of the present methodoogy of
preparng the cost estmates wthout any provson for prce contngences.
Because of tme ag between preparaton of cost estmates and nvestment
decsons, after ts scrutny by the apprasng agences, these estmates are
aready out of data and hence woud need updatng.
CAPITAL BUDGETING
E@AMPLE OF STAGE I 7 II
S. Schemes Outay
1. Stage-I ( 3 x 20000 MT) 5,48,92,00,000
2. Stage- II( 3 x 50000 MT) 11,03,69,00,00
3. Stage-III( 1 x 50000MT) 1229.38(Mons)
Stage - I consstng outay of 5,48,92,00,000 ths s Recovered n 5 years of
tme.
RECOVERY OF PROJECTS ;S&a3!1I<:
Foowng cacuatons are under consder
Under Dscounted Pay Back Perod:
Stage - I ( 3 x 20000 ) Outay : 5,48,92,00,000
NET PRESENT VALUE:
GRAPH 1:
Y!a
r
Cas+ I">o.s Dis5
C84D
Pr!s!"& Va(u! o)
Cas+>o.s
1 Rs.
1.129.384.000
0,892 Rs. 1.007.410.528
2 Rs.
1.310.895.000
0,797 Rs. 1.043.986.315
3 Rs.
1.761.879.000
0,711 Rs. 1.252.695.969
4 Rs.
1.732.086.000
0,635 Rs. 1.109.874.610
5 Rs.
2.193.061.000
0,567 Rs. 1.243.465.587
Pr!s!"& Va(u! o) Cas+
F(o.s
Rs5 E5F6G56$$5H8H
L!ss: Cas+ Ou&(ay Rs5 E56IJ54HH5HHH
N!& Pr!s!"&
Va(u!
Rs5 8EI54$$5H8H
Interpretaton:
The Net Present Vaue s the dherence between the " Present vaue of cash
nows" and "Present vaue of cash outows.
PROFITABILITY INDE@ ; P5I<:
Y!ar I"0!s&m!"&s ;I"
LaA+s<
Cas+
i">o.s;P5V5<
Cas+ Ou& F(o.s
;I"i&ia(<
1999-
00
2,945,083.3
7
18180 20000
2000-
01
3,040,293.1
7
24780 30000
2001-
02
3,192,444.2
8
45070 60000
2002-
03
3,071,183.1
1
54640 80000
2003-
04
3,545,210.8
7
18630 30000
2004-
05
9,025,874.0
0
161290 22000
2005-
06
3,991,459.4
0
19210 33000
2006-
07
4,038,114.2
0
11130 70000
2007-
08
3,667,441.1
5
65420 40000
2008-
09
7,338,000.0
0
19233 80000
2009-
10
2,089,775.0
0
61323 60000
Tota: 6JIIJF E4EHHH
P.V. of Cash Inows
PI = ---------------------------
Inta Cash outays
498896
= ---------- = 0.95
525000
GRAPH 4 :
I"&!r/r!&a&io":
a) The protabty ndex of present vaue of cash nows and cash
out ows s uctuaton from year to year n the year 1999-00 the
present vaue of cash nows s 18180 were as n the year 2009-
10 has been ncreased wth 61323.
b) The hghest cash nows has been recorded n 2004-2005 as
161290 and owest has been recorded as 18180 n the year
1999-00.
PAY BAC2 PERIOD:
Y!ar I"0!s&m!"&s ;I"
LaA+s<
Cas+
i">o.s;P5V5<
Cas+ Ou& F(o.s
;I"i&ia(<
1999-
00
40,000.0
0
8000 20000
2000-
01
60,000.0
0
1600 30000
2001-
02
70,000.0
0
2200 60000
2002-
03
20,000.0
0
4500 80000
2003-
04
10,000.0
0
4000 30000
2004-
05
66,000.0
0
3000 22000
2005-
06
25,000.0
0
2900 33000
2006-
07
12,000.0
0
1100 70000
2007-
08
90,000.0
0
1600 40000
2008-
09
30,000.0
0
1200 80000
2009-
10
50,000.0
0
1800 60000
Tota: 6G$KHHH5
HH
$8JHH E4EHHH
Inta Investments
Pay Back Perod = ---------------------------
Annua Cash nows
40,000
= --------- 5 Years
8000
GRAPH 3:
Interpretaton:
a) In the Pay Back method the Investment and the case nows are
uctuatng from year to year where as n the year 1999-00 t s
40000 and n the year 2009-10 s 50000.
b) Cash nows are n the order of ncreasng to decreasng from
1999-00 and 2009-10.
AVERAGE RATE OF RETURN:
Y!ar I"0!s&m!"&s
;LaA+s<
A0!ra3! I"om!
;T+ousa"#s<
Cas+ F(o.s a)&!r
Ta,!s
2000-
01
400,000.0
0
20000 100000
2001-
02
480,000.0
0
15000 260000
2002-
03
280,000.0
0
28000 440000
2003-
04
240,000.0
0
85000 750000
2004-
05
150,000.0
0
75000 160000
2005-
06
260,000.0
0
64000 200000
2006-
07
600,000.0
0
78000 300000
2007-
08
100,000.0
0
25000 600000
2008-
09
250,000.0
0
18000 800000
2009-
10
520,000.0
0
22000 750000
Tota $K4IHKHHH5
HH
6$HHHH 6$FHHHH
Average Income
Average Rate of Return = ----------------------
Average Investments
20000
= --------- = 0.06%
400000
GRAPH 4:
Interpretaton:
a) Average rate of return s cacuated based on Average ncome and
Average nvestment where as Average ncome n the year 2003-04 s
20000 and nvestments n the year 2009-10 s 400000.
b) The vaue from 2003-04 and 2009-10 are uctuatng from year to year.
DISTRIBUTION OF REVENUE 4H4H14H4H
I"&!r/r!&a&io"s:
a) In the year 2009-10 the revenue s dstrbuted n the from of fue
retaned earnng, dvdends s atest nance change, deprecaton
and for empoyees.
b) Where as n the year 2009-10 t s been uctuated the rates
compare to the year 2009-10.
TABLE G:
FY YEAR NET BLOC2 ;IN LA2S<
2004-05 284738
2005-06 323083
2006-07 328916
2007-08 386106
2008-09 400381
2009-10 520861
NET BLOC2 AND GROSS FI@ED ASSETS
284738
323073
328916
366106
400281
520761
0
100000
200000
300000
400000
500000
600000
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Series1
I"&!r/r!&a&io"s:
a) From 2006-2007 the net bock and gross xed assets s 328916.
b) Where as the Net Bock and gross xed asset s been ncreased n
the year 2009-10.
TABLE I:
FY YEAR NET SALES;IN LA2S<
2004-05 229055
2005-06 258117
2006-07 286453
2007-08 315400
2008-09 355502
2009-10 440302
NET %ORTH AND NET ASSETS
229045
258117
286453
315040
355501
440201
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
04-05 05-06 06-07 07-08 08-09 09-10
Series1
I"&!r/r!&a&io"s:
a) Net worth and net assets has been ncreasng from year to year
from 2005-06 t s 229055 and compare to 2009-10 t has been
ncreased to 440302.
b) By observng the chat we can say the net worth and net assets has
been ncreasng from 2005-06 to 2009-2010.
TABLE J :
FY YEAR PROFIT AFTER TA@
2004-05 34245
2005-06 37338
2006-07 35396
2007-08 36085
2008-09 52609
2009-10 72032
PROFIT AFTER TA@
34245
37338
35396
36075
52608
72022
0
10000
20000
30000
40000
50000
60000
70000
80000
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Series1
I"&!r/r!&a&io"s:
a) The chart show the ncrease vaue after the deducton of tax n the
year 2009-10.
b) The Prot s changng from year to year n the year 2004-05 t s 34245
where as ncreasng vaue n the year 2004-2005 and decreased, n
the year 2009-10 the vaue s ncreased.
TABLE 8H :
FY YEAR
PO%ER GENERATION ;M
UNITS<
2004-05 7470
2005-06 7080
2006-07 7090
2007-08 10923
2008-09 19790
2009-10 19237
GENERATION AND SALES
7470
7070 7080
10823
19790
19237
0
5000
10000
15000
20000
25000
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Series1
GENERATION IN MUS ? SALES IN MILLIONS:
I"&!r/r!&a&io"s:
a) On the X - ars year are been shown from 2004-05 to 2009-10 and the
vaue has been ncreasng from year to year.
b) In the year 2004-05 the generaton and sae has been 7470 and the
vaue has been ncreasng year to year but 2009-2020 the vaue s
decreasng.
FINDINGS AND SUGGESTIONS
FINDINGS ANDSUGESSTIONS
The Corporate msson of PEPSICO s to make avaabe reabe and
quaty power n ncreasngy arge quanttes. The company w spear
head the process of acceerated deveopment of the power sector by
expedtousy pannng, mpementng power pro|ect and operatng
power statons economcay and emcenty.
As n pro|ect mpementaton, the staton contnued to exce n power
generaton wth the power staton havng reached ts rst goa of tota
capacty nstaaton. Ramagundam s generatng power at consstenty
hgh pant oad factor.
The organzaton needs the capabe personates as management to
ead to organzaton successfuy. The management make the pans and
mpement of these pans. These pans are expressed n terms of ong-
term nvestment decsons.
The speca budgets are rarey used n the organzaton ke ong-term
budgets, research & deveopment budget and budget and budget for
constancy.
From the Revenue budget for the year 2000-2003, t s cear that the
Actua saes ( Rs. 168552.50 acks) are more then the budgeted or
Estmated saes ( Rs. 164208.54 acks). It s a good sgn and the overa
earnngs of the budget ndcate hgh voume over estmated.
Fue utzaton s perfecty carry out n RSTPS. And Cash from Ash
ehectvey carry out the |ob.
New pro|ects acceptance consder on the bass of Return Benets. Rsk
s evauated whe consderng the new pro|ects.
CONCLUSIONS
Every organzaton has pre-determned set of ob|ectve and goas, but
reachng those ob|ectves and goas ony by proper pannng and
executng of the pans economcay.
Wth n a Short span of ts exstence, the corporaton has
commssoned 19502 MW as on 31
st
March, 2000 wth an operatng
capacty of 19.9%. PEPSICO today generate 24.9% of natons
eectrcty. PEPSICO s presenty executng 12 Cement manufacturng
Pro|ects and 6 Gas based cement manufacturng pro|ects wth a tota
approved capacty of 29,935 MT as on 31
st
March 2004.
BIBLIOGRAPHY
R!)!r!"!s :
Fnanca accountng
Cost and management accountng
Fnanca accountng
Accountng for management
%!*si&! :
www.googe.com
www.PEPSICO.com
www.yahoonance,com