Q1.

Current Assets Mar-19 Mar-18 Mar-17

Inventories 8,113.49 6,258.76 7,372.38

Trade Receivables 12,009.57 22,771.49 22,075.56
Cash And Cash Equivalents 7,503.34 11,291.18 10,491.79
Short Term Loans And Advances 157.45 147.12 138.88
OtherCurrentAssets 10,556.04 2,719.84 2,815.35
Total Current Assets 38,339.89 43,188.39 42,893.96

Current Liabilities Mar-19 Mar-18 Mar-17

Short Term Borrowings 2,457.27 0 0

Trade Payables 11,375.11 10,586.86 8,709.16
Other Current Liabilities (Accrued expenses) 6,737.91 7,880.60 7,224.95
Short Term Provisions 2,485.48 3,782.77 4,191.56
Total Current Liabilities 23,055.77 22,250.23 20,125.67

Compute
Mar-19 Mar-18 Mar-17
(a)    Working Capital 15,284.12 20,938.16 22,768.29
(b)    Working Capital as a% of
52% 75% 83%
Sales Revenue

Sales Revenue 29,349.21 27,963.15 27,587.64

Compute
Mar-19 Mar-18 Mar-17
(a)    Non-Cash Working 12,566.08 13,282.63 16,329.18
Capital
(b)    Non-Cash Working
Capital as a% of Sales 43% 48% 59%
Revenue

Sales Revenue 29,349.21 27,963.15 27,587.64

Q2. 20%
Year Revenue Working Capital Change in WC
0 0 0
1 0 0 0
2 0 2000 -2000
3 10,000 2400 -400
 4 12,000 2800 -400
5 14,000 3200 -400
6 16,000 4000 -800
7 20,000 3800 200
8 19,000 3600 200
9 18,000 3400 200
10 17,000 3200 200
11 16,000 3000 200
12 15,000 0 3000

Conclusion: Lower ther working capital, higher the NPV

Q3.

Expected Estimated Cost of

i) WC as a % of revenue Growth in capital Expected Value of
revenue firm
(%) (%)
0 4.5 10.9 1632.81
10 5 11 1666.67
20 5.2 11.11 1604.06
30 5.35 11.23 1518.71
40 5.45 11.36 1415.40
50 5.5 11.5 1300.00
60 5.54 11.65 1183.31
70 5.55 11.8 1067.20
80 5.55 11.95 955.47
90 5.55 12.1 848.85
100 5.55 12.35 736.03

Expected Estimated Cost of

Growth in capital Expected Value of
ii) WC as a % of revenue revenue firm
(%) (%)
0 4.5 11.11 1580.94
10 5 11.11 1636.66
20 5.2 11.11 1604.06
30 5.35 11.11 1550.35
40 5.45 11.11 1477.92
 50 5.5 11.11 1390.37
60 5.54 11.11 1298.03
70 5.55 11.11 1199.64
80 5.55 11.11 1099.82
90 5.55 11.11 1000.00
100 5.55 11.11 900.18

Expected Estimated Cost of

Growth in capital Expected Value of
WC as a % of revenue
iii) revenue firm
(%) (%)
0 4.5 12.5 1306.25
10 5 11.72 1488.10
20 5.2 11.11 1604.06
30 5.35 10.6 1700.95
40 5.45 10.2 1761.05
50 5.5 9.9 1772.73
60 5.54 9.7 1737.98
70 5.55 9.55 1667.50
80 5.55 9.45 1567.95
90 5.55 9.38 1451.70
100 5.55 9.32 1327.59

Q4. Firm Inventory AR Other CA

BHEL 8,113 12,006 10,556
Bharat Elec 4,414 5,369 5,103
AIA Engine 458 901 182
Thermax 230 837 2471
NESCO 9 18 11
BEML 1,702 1,613 811
Greaves Co 115 337 41
Triveni Tur 217 173 37
GMM Pfau 103 49 22
KSB Ltd 303 291 72
Kirloskar oil engine 242 355 106
Praj Indust 104 228 160
Kirloskar Brothers 367 471 440
 Given the sales revenue , regress Non-Cash WC as a % of revenue against ln Sales revenue for the firms and conc
their Non-cash WC

Sales Non-cash WC/Rev

Firm Revenue Ln Reve
( in Rs cr) ( in %)
BHEL 29,349 10.2870137531 42.8%
Bharat Electronics 11,789 9.3749221723 41.7%
AIA Engineering 2,737 7.914617709 50.1%
Thermax 3,488 8.157083785 8.7%
NESCO 359 5.8833223885 -14.5%
BEML 3,458 8.1484456662 73.1%
Greaves Co 1,985 7.5933741931 5.0%
Triveni Turbine 811 6.6982680541 18.6%
GMM Pfaudler 412 6.0210233493 13.3%
KSB Ltd 1,078 6.9828627515 27.4%
Kirloskar oil engine 3,119 8.0452677166 5.8%
Praj Indust 904 6.8068293604 9.7%
Kirloskar Brothers 2,243 7.7155695345 13.2%

Q5. Given data: (in million)

Current Net Working Capital ₹ 20.00 (20% of revenues)
Current Revenues ₹ 100.00
After Tax Operating Income ₹ 5.00 (5% of revenues)
Growth Rate 5%
Cost of Capital 12%

Current Value of the firm

Sum (After tax operating Income - Changes in Working Capital)
($5 million (1.05) - ($100 million)(0.05)(0.2))/(cost of cap - growth rate)
₹ 4.25 / (12%-5%)
₹ 60.71 million
The revenues should drop by a minimum of $ 16.14 million to negativ
 Mar-16 Mar-15

9,602.15 10,101.66
22,430.12 26,223.50
10,085.99 9,812.70
176.61 2,224.65
2,830.41 175.03
45,125.28 48,537.50

Mar-16 Mar-15

0 0
8,698.34 8,798.94
8,689.32 9,123.31
3,335.90 4,285.23
20,723.56 22,207.48

Mar-16 Mar-15
24,401.72 26,330.02

94% 89% Average = 78.46

26,050.07 29,541.97

Mar-16 Mar-15
17,475.02 18,577.94

67% 63% Average = 55.9

26,050.07 29,541.97

Salvage value PVIF Present value Year

1 0 0
0.909090909 0 1
0.826446281 -1652.892561983 2
0.751314801 -300.5259203606 3
 0.683013455 -273.205382146 4
0.620921323 -248.3685292237 5
0.56447393 -451.579144043 6
0.513158118 102.6316236461 7
0.46650738 93.3014760419 8
0.424097618 84.8195236745 9
0.385543289 77.1086578859 10
0.350493899 70.0987798963 11
3000 0.318630818 955.8924531311 12
-1542.719023481 Value destroyed

EBIT 100

Revenue
1000
Trade Payables Other CL Non-cash WC
11,375 6738 12,562
1,435 8,533 4,918
152 19 1,370
799 2434 305
11 79 -52
762 836 2,528
319 75 99
119 157 151
53 66 55
218 153 295
382 139 182
189 215 88
537 444 297
revenue for the firms and conclude on which firms are under/over invested in
ash WC

Predicted WC Actual WC Under/over Predicted % of

invested in WC non-cash
Remarks WC/rev
14877.3637439242 12,562 -2,315 under 0.5069121178
4828.5542683183 4,918 89 over 0.4095813274
694.5133122057 1,370 675 over 0.25374984
975.3277906172 305 -670 under 0.2796237932
13.2783260669 -52 -65 under 0.0369869807
963.7515344685 2,528 1,564 over 0.2787020053
435.6467926069 99 -337 under 0.2194694169
100.5243996274 151 50 over 0.1239511709
21.2926858552 55 34 over 0.0516812763
166.3577560353 295 129 over 0.1543207384
834.9304650142 182 -653 under 0.2676917169
122.5244772859 88 -35 under 0.1355359262
521.5178719911 297 -225 under 0.2325090825

New Value of the Firm

Reduction in Inventory $ 8 million (20 x 0.4)
New Value of the Firm ₹ 52.71 million

Let the new revenues be X

New WC (percentage of Revenues) 12%
New After tax Op Income 0.05 x X
Change in new WC 0.05 x 0.12 x X
 Value of the firm (.05X - 0.05x0.12X)/(0.12-0.05) = $52.71
New Revenue ₹ 83.86 million

um of $ 16.14 million to negatively affect the value of the firm

 10%
Revenue Working Capital Change in WC Salvage value PVIF Present value
0 0 1 0
0 0 0 0.909091 0
0 0 0 0.826446 0
10,000 1000 -1000 0.751315 -751.3148009
12,000 1200 -200 0.683013 -136.6026911
14,000 1400 -200 0.620921 -124.1842646
16,000 1600 -200 0.564474 -112.894786
20,000 2000 -400 0.513158 -205.2632473
19,000 1900 100 0.466507 46.650738021
18,000 1800 100 0.424098 42.409761837
17,000 1700 100 0.385543 38.554328943
16,000 1600 100 0.350494 35.049389948
15,000 0 1600 3000 0.318631 509.80930834
-657.7862628 Value destroyed
SUMMARY OUTPUT

Regression Statistics
Multiple R 0.56442
R Square 0.31857
Adjusted R 0.256621
Standard E 0.202414
Observatio 13

ANOVA
df SS MS F Significance F
Regression 1 0.210696 0.210696 5.142515 0.044486
Residual 11 0.450686 0.040971
Total 12 0.661382

Coefficients
Standard Error t Stat P-value Lower 95%Upper 95%
Lower 95.0%
Upper 95.0%
Intercept -0.59083 0.364976 -1.61883 0.133775 -1.39414 0.212474 -1.39414 0.212474
X Variable 0.106712 0.047057 2.267711 0.044486 0.00314 0.210283 0.00314 0.210283

RESIDUAL OUTPUT

ObservationPredicted Y Residuals
Standard Residuals
1 0.506912 -0.07889 -0.40708
2 0.409581 0.007587 0.03915
3 0.25375 0.246798 1.273491
4 0.279624 -0.19218 -0.99166
5 0.036987 -0.18183 -0.93827
6 0.278702 0.452356 2.334181
7 0.219469 -0.1696 -0.87512
8 0.123951 0.062239 0.321155
9 0.051681 0.081814 0.422164
10 0.154321 0.119334 0.61577
11 0.267692 -0.20934 -1.0802
12 0.135536 -0.03819 -0.19707
13 0.232509 -0.1001 -0.51651