Calculate pre-tax return on sales and return on investment

Assignment Help Microeconomics

Reference no: EM133261192

Question: One of your clients is planning to setup a manufacturing plant for Auto Pistons. The client has approached you to estimate the working capital requirement which is needed to setup a Piston Plant at inception stage. You have the following details with you about the Investment Model Layout. Compute the ROI and Break even production level for this plant

Table: Fixed and Variable Expenses for Auto Piston Plant
Parameters
Fixed Capital Investment Annual Salary Expenses Annual Raw Material Expenses Annual Rent
Other Annual Expenses Annual Sales Revenues
Value in INR
498,000 3,810,000 4,122,000
600,000
618,000 10,620,000
Table: Assumption made for setting up Auto Pistons Manufacturing Plant
Description
Raw Material Inventory
Debtor Realization Period
Creditors Payment Period ; except Raw Material and Rent Raw Material Payment Period
Rent Security
Depreciation
Period
1 Month 3 Month 1 Month
Cash 1 Month 10%
Based upon the above data, you are required to do the following analysis

a. Estimate the working capital requirement for this production plant for the First year of operation

b. The promoter contributes 60% of the total fixed and working capital requirement for the business, while 40% of the amount is taken in the form of loan from bank at an Interest rate of 12% for 5 years. Calculate the promoter contribution and EMI for this model

c. Calculate pre-tax return on sales and Return on Investment (ROI) from Auto piston plant

Reference no: EM133261192

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