Final p Project Nw Chnges

7/30/2019 Final p Project Nw Chnges

1/87

A Project Report

On

CAPITAL BUDGETING

For

WESTERN COALFIELDS LIMITED

Submitted by

MS. Priti Krishnarao Rasegaonkar

Under the guidance of

Mr. Uttam Sapate

Submitted to

UNIVERSITY OF PUNE

IN

Partial fulfillment of the requirement of the award of the degree of

MASTER OF BUSINESS ADMINISTRATION (MBA)

Through

ALL INDIA SHREE SHIVAJI MEMORIAL SOCIETYS

INSTITUTE OF MANAGEMENT (MBA)

KENNADY ROAD, PUNE 1

YEAR: 2010-2012


2/87

ACKNOWLEDGEMENT

Success can never be attained without proper guidance

A project in an organisation is an experience wherein academic knowledge

gained is applied in a practical manner. I had an opportunity to complete my

summer project in WESTERN COALFIELDS LIMITED, NAGPUR.

The project is great source of learning & a good experience as it made me aware

of professional culture & conducts that exist in an organization. Inspection &Guidance are valuable in all aspects of life especially in an academic field.

I would like to express my gratitude to Dr. SINHA, Director, who mentored me

for successful completion of this project.

I am also thankful to WESTERN COALFIELDS LIMITED, NAGPUR. For

permitting me to purse the project in their esteemed concern and also to all the

employees of western coalfields ltd.

I express my sincere thanks to Prof. Dr.Uttam Sapate, without his guidance &

inspiration; I could not have completed my project.

I would like to express my heart full thanks to company employees (Finance

department), who gave me all the necessary information and guidance in

completion of this project.

I will always carry fond memories of these training days.

Priti K.Rasegaonkar


3/87

DECLARATION

I, Miss. Priti K. Rasegaonkar, a student of AISSMS Institute of Management,

Kenedy road, Pune, hereby solemnly declare that the project report entitled

CAPITAL BUDGETING with special reference to Western Coalfields

Limited, NAGPUR was carried out by me in partial fulfillment of M.B.A.

Program according to the Pune University rules and norms and had no

commercial interest or motive.

Further, I also declare that I have tried to my level best to complete this

project with almost sincerely, honestly and accuracy, even then if, any mistake or

error has crept in I shall most humbly request to reader to point out those

errors,any suggestion regarding this project will be most welcome.

It is my original work and is not submitted to any other organization for any other

purpose.

Date: Priti K.Rasegaonkar

Place:


4/87

EXECUTIVE SUMMARY

Introduction:

A project is about the Capital Budgeting, A Capital Budgeting is a method which

is implemented in most of the organization and proper as well as planned

implementation provides fruitful results i.e. in terms of profit maximization and

growth of the company in a high competitive environment.

Reason for Selecting Topic:

Capital Budgeting is a very crucial part of FINANCE activities for any

organization and management devote significant amount of time and efforts for

this activity.

Scope Of Project:

This research project aims at studying and analyzing the current practices of capital

budgeting at Western coalfields ltd. (WCL).The research project would help WCL to implement new and better techniques

of capital budgeting while evaluating new projects i.e. acquiring new coal mines.Company Profile:

Western Coalfields Limited (WCL) is one of the eight Subsidiary Companies of

Coal India (CIL), which is under administrative control of Ministry of Coal.

Industry Profile:

Coal India Limited (CIL) is a Schedule 'A' 'Navratna 'Public Sector Undertakingunder Ministry of Coal, Government of India, with Headquarters in Kolkata, West

Bengal. CIL is the single largest coal producing company in the world.

Objectives:

The primary objective of the project is to study the Capital Budgeting techniques

required for financial investment of company. And to study and understand the c-

urrent trend, procedure & implementations of capital budgeting techniques at

WCL.


5/87

Research Methodology:

Research is a process of collecting, analyzing and interpreting information to

answer questions. It is structured enquiry that utilizes acceptable, scientific

methodology to solve problems and create new knowledge.

Conclusion:

After doing study, I came to a conclusion that the projects are evaluated based on

12% IRR.

Suggestions and Recommendations:

After doing a study it is observed that there is hierchy and approval takes very

long time. The methods of Capital Budgeting may be utilizes in an effective way.


6/87

CHAPTERI

INTRODUCTION


7/87

1.1 INTRODUCTION:-

A project is an activity sufficiently self- contained to permit financial

and commercial analysis. In most cases projects represent expenditure of

capital funds by pre- existing entities which want to expand or improve

their operation.

In general a project is an activity in which, we will spend money in

expectation of returns and which logically seems to lead itself to planning.

Financing and implementation as a unit, is a specific activity with a

specific point and a specific ending point intended to accomplish a

specific objective.

To take up a new project, involves a capital investment decision

and it is the top managements duty to make a situation and feasibility

analysis of that particular project and means of financing and

implementing it financing is a rapidly expanding field, which focuses not

on the credit status of a company, but on cash flows that will be generated

by a specific project.

Capital budgeting has its origins in the natural resource and

infrastructure sectors. The current demand for infrastructure and capital

investments is being fueled by deregulation in the power,

telecommunications, and transportation sectors, by the globalization of

product markets and the need for manufacturing scale, and by the

privatization of government owned entities in developed and developing

countries.

The capital budgeting decision procedure basically involves the

evaluation of the desirability of an investment proposal. It is obvious that

the firm most have a systematic procedure for making capital budgeting

decisions.


8/87

1.2 CAPITAL BUDGETING:-

Capital budgeting is one of the most important factors in the process of

corporate decision-making. Data from numerous previous studies show that

managers prefer the simple payback period method (non-discounted payback

model)over the net present value method (discounted cash flow model), which

academicsconsider as superior.

Capital budgeting is a required managerial tool. One duty of a financial

manager is to choose investments with satisfactory cash flows and rates of return.

Therefore, a financial manager must be able to decide whether an investment is

worth undertaking and be able to choose intelligently between two or more

alternatives. To do this, a sound procedure to evaluate, compare, and select

projects is needed. This procedure is called capital budgeting.

1.3 WHAT IS CAPITAL BUDGETING ?

The term Capital Budgeting refers to the long-term planning for proposed

capital outlays or expenditure for the purpose of maximizing return on

investments.

The capital expenditure may be:

(1) Cost of mechanization, automation and replacement.

(2) Cost of acquisition of fixed assets.

e.g., land, building and machinery etc.

(3) Investment on research and development.

(4) Cost of development and expansion of existing and new projects.


9/87

Capital budgeting is a process used by companies for evaluating and

ranking potential expenditures or investments that are significant in amount. The

large expenditures could include the purchase of new equipment, rebuilding

existing equipment, purchasing delivery vehicles, constructing additions to

buildings, etc. The large amounts spent for these types of projects are known as

capital expenditures.

Capital budgeting usually involves the calculation of each projects future

accounting profit by period, the cash flow by period, the present value of the

cash flows after considering the time value of money, the number of years it

takes for a projects cash flow to pay back the initial cash investment, an

assessment of risk, and other factors. Capital budgeting is a tool for

maximizing a companys future profits since most companies are able to

manage only a limited number of large projects at any one time.

1.4 INVESTMENT DECISIONS

The Capital Budgeting decision denotes a decision situation where the

lump sum funds are invested in the initial stages of a project and the returns

are expected over a long period. The capital budgeting decision involve the

entire process of decision making relating to acquisition of long term assets

whose returns are expected to arise over a period beyond one year, Planning

and control of capital expenditures is a major decision area in any

organization.


10/87

1.5 IMPORTANCE OF INVESTMENT DECISIONS:-

Capital investments, representing the growing edge of a business,

are deemed to be very important for three inter- related reasons.

1. The influence firm growth in the long term consequences capital

investment decisions have considerable impact on what the firm can do in

future.

2. They affect the risk of the firm; it is difficult to reverse capital investment

decisions because the market for used capital investments is ill organized

and /or most of the capital equipments bought by a firm to meet its

specific requirements.

3. Capital investment decisions involve substantial out lays. Capital

budgeting is more or less a continuous process and it is carried out by

different functional areas of management such a production, marketing,

engineering, financial management etc. All the relevant functional

departments play a crucial role in the capital budgeting decision process.


11/87

CHAPTERII

COMPANY PROFILE


12/87

2.1 ABOUT THE COMPANY :

WESTERN COALFIELDS LIMITED

Western Coalfields Limited (WCL) is one of the eight Subsidiary Companies of

Coal India (CIL), which is under administrative control of Ministry of Coal. The

Company incorporate under the Companies Act, 1956 has its registered office at

Coal Estate, Civil Lines, Nagpur-440001.

The Company contributes about 11.3% of the national coal production. It

has mining operation spread over the states of Maharashtra (in Nagpur,

Chandrapur and Yeotmal Districts) and Madhya Pradesh (in Betul and

Chandrapur Districts).

The company is a major source of supplies of Coal Industries located in

Western India in the States of Andhra Pradesh, and Gujarat and also in Southern

India in the States of Andhra Pradesh, Tamil Nadu, Karnataka and Kerala. A

large number of Power Houses under Maharashtra, Madhya Pradesh, Gujarat,

Karnataka, Punjab and Uttar Pradesh- Electricity Boards are major consumers of

its coal along with cement, chemical, fertilizer, paper and brick Industries in these

states.

The company came into being on 1st

November, 1975, after re-

organization of the nationalized coal industry. At that juncture, the operations ofWCL were spread over the States of Maharashtra and M.P. organized into 10

Coal producing Areas, one workshop to provide services of repair and

maintenance of Machineries/ Equipment and One Coal Washeries.

By the year 1985-86, number of mines had increased to 130 and total

production to 48.89 Million Tonnes. Keeping in view the tremendous growth

programme the company was bifurcated, with effect from January 1986, into

South Eastern Coalfields Limited and the present Western Coalfields Ltd.


13/87

The command area of WCL has reserves of 11079 Million Tonnes of

coal, out of 2, 45,692 Million Tonnes in India as on 01.01.2004. With 4.51% of

coal reserves WCL contributes about 13% towards CIL production and 11%

towards national coal production.

WCL has made concerted progress rationalizing its manpower. Despite

increase in production from a level of 22.78 Million Tonnes to 39.53 Million

Tonnes during the period 1990-91 to 2003-04, WCL is able to gradually reduce

its overall manpower and increased production and productivity.

2.2COAL TYPES:

Chemically Coal is made of carbon, hydrogen, oxygen, nitrogen and some other

impurities. The main constitute of coal are:

Carboneous Non-Carboneous

Vitarin Ash

Clarin Moisture

Volatile Matter

Fixed Carbon

Basically Coals are four types:

1. Anthracite2. Bituminous3. Lignite4. Peat


14/87

WCL is mainly concerned with bituminous coal. These are mainly of two types:-

1. Coking Coal2. Non-Coking Coal

Coking Coal is that variety of coal which contains less percentage of ash and has

high heat value. It can convert into hard coke which is suitable for iron and steel

industry.

Non-Coking coal is that variety of coal which contains high percentage of ash

and has low heat value.

2.3 METHOD OF EXTRACTION OF COAL:

Coal is obtained from the earths surface called mines. Mines are of two types:

1) OPENCAST MINES:

In this type of mine, attempt is made to reach the level of coal seam with the help

of technology, by removing the over burden (i.e. after removing everything lying

above the coal seam). For this heavy machines like HEMM (Heavy Earth Moving

Machine) are used and the manpower is reduced.

2) UNDERGROUND MINES:

In this type of mine technology attempts to reach the coal seam not by removing the

overburden but through a pit. These mines are in those areas where the coal

seam is deep. The over burden remains intact and the workers dig the ground.

The workers are sent to the level of coal seam either through shaft (an in clination)

or through lift i.e. DOLI. There is optimum utilization of manpower in these mines.


15/87

In this type of mines, there is high risk of accidents due to the fall of roofs and

sides. In order to avoid these accidents thrust is given to provide support of green roof

with steel supports like steel cogs, pit props, roof bolts, W-straps, etc.

2.4 AWARDS ANDCERTIFICATES :

WCL is recipient of Vanashree Award from Govt. of Maharashtra for

afforest ration.

WCL received Jawaharlal Nehru Memorial Award from International

Green Land Society for effective implementation pollution control

measures in the mining areas.

WCL received India 2000 Millennium Award from World Peace for

WCLs contribution in motivating the employees on environmental

protection works at projects and mines.

WCL received Appreciation Certificates from social forestry

department Government of Maharashtra for spectacular contribution in

afforest ration in the Vidharbha region.

Umrer and Padampur are the first among the coalmines in the country toget ISO-9001: Quality management system certifies certificate from SGS

United Kingdom Ltd.

WCL was ranked 87th

in the list of Indian Globally competitive

Companies (published in Business World, 17th

June issue).


16/87

2.5 WCL AT A GLANCE :

Number of working mines: 01.04.2011

Opencast : 38

Underground : 43

Mixed (OC+UG) : 02

Total : 83

Coal Production Actual Actual

(Million Tonnes) 2010-11 2009-10

Opencast 34.95 36.12

Underground 08.70 09.62

Total 43.65 45.74

Manpower (as on) 1.4.2011 1.4.2010

Executives 2409 2196

Monthly Rated 12058 12702


17/87

Daily Rated 39812 41051

Piece Rated 4182 4494

Transfers/Casuals and 582 427

Company Trainee

Total 59043 60870

Manpower Reduction 1827 1622

2.6 FINANCIAL PERFORMANCE :

The turnover of the company during the year 2010-11 was Rs.7073.44

crores against budgeted Rs.6765.74 crores. The net profit for the year is

Rs.1067.97 crores against budget of Rs.386.12 crores. The total sales realization

during 2010-11 was Rs.7314 crores.

The company has paid Rs.504.74 crores by way of corporate taxes to

Central Government during the year 2010-11.


18/87


19/87

0

200

400

600

800

1000

1200

1400

1600

Profit

Budgeted Profit

Profit


20/87

CHATER-III

INDUSTRY PROFILE IN INDIA


21/87

INDUSTRY MEANING

The Production Side Of Business Activity Is Referred As Industry. It Is A

Business Activity, Which Is Related To The Raising, Producing, Processing Or

Manufacturing Of Products. The Products Are Consumers Goods As Well As

Producers Goods. Consumer Goods Are Goods Which Are Used Finally

By Consumer E.G. Food Grains, Cosmetics Etc. Producers Goods Are The

Goods Used by Manufactures for Producing Some Other Goods E.G. Machinery,

Tools, Equipments, Etc. Expansion Of Trade and Commerce Depends on

Industrial Growth. It Represents The Supply Side Of Market.

Classification/Types of Industries

There Are Various Types of Industries. These Are Mentioned as Below:-

Explanation:

Primary Industry

Primary Industry Is Concerned With Production Of Goods With The Help Of

Nature. It is Nature Oriented Industry, Which Requires Very Little Human

Efforts.

E.g.-Agriculture, Farming, Fishing, Forestry, Etc.

Types of Industries

Primary

IndustryGeneric

Industry

Service

Industry

Manufact

uring

Industry

Constructi

on

Industry

Extractive

Industry


22/87

Genetic Industry

Genetic Industries Are Engaged In Re-Production And Multiplication Of Certain

Spices Of Plants And Animals With The Object Of Sale. The Main Aim Is To

Earn Profit From Such Sale.

E.g.-Cattle Rearing, Poultry, plant Nurseries, Etc.

Service Industry

In Modern Times Service Sector Plays An Important Role In The development

Of The Nation And Therefore It Is Named As Service Industry. The Main

Industries Which Fall Under This Category Include Hotel Indusrty, Tourism

Industry, And Entertainment Industry, Etc.

Manufacturing Industry

Manufacturing Industries Are Engaged In Transforming Raw Material Into

Finished Products With The Help Of Machines And Manpower. The Finished

Goods Can Be Either Consumer Goods Or Producer Goods.E.g.-Textiles, Chemicals, Paper Industry, Sugar Industry, Etc.

Construction Industry

Construction Industries Take Up The Work Of Construction Of

Buildings, Bridges, Roads, Dams, And Canal, Etc. These Types Of Industry Are

Different From All Other Types Of Industry Because In Case Of Other Industries

Goods Can Be Produced At One Place And Sold At Another Place. But Goods

Produced And Sold By Constructive Industry Are Erected At One Place.

Extraction Industry

Extractive Industries Is Concerned With Extraction Or Drawing Out Goods From

The Soil, Air Or Water. Generally Products Of Extractive Industries Come In

Raw Form And They Are Used By Manufacturing And Construction Industries

For Producing Finished Goods.

E.g.-Mining Industry, Coal Mineral, Oil Industry, Etc.


23/87


24/87

Coal India Limited (CIL) is a Schedule 'A' 'Navratna 'Public Sector

Undertaking under Ministry of Coal, Government of India, with Headquarters in

Kolkata, West Bengal. CIL is the single largest coal producing company in the

world and the largest corporate employer in the country with manpower of

409,332 (as on 1 July 2009). With proven coal reserves of 105.82 Billion Tonnes

out of total reserves of 267 Billion Tones (as on 1 April 2009) Coal India plays a

pivotal role in Indian energy scenario.

CIL contributes around 85% of coal production in India; it is the largest

company in the World in terms of coal production. Employs nearly 4.25 Lakhs

persons and is the largest corporate employer in the country. It is one of the largest

Companies in the country, turn over being around Rs. 386.31 billion in 2007-08. It

is one of the largest tax payers (Corporate Tax Rs.35.75 billion) in 2007-08

and has paid Dividend of Rs17.054 Billi on to the Govt. of India in 2007-08.

Today, Coal India has eight Subsidiary Companies including CMPDI,

and is one of the largest Corporate Employers of the world, employing about 3.83

Lakhs people. CIL produced 431.32 Million Tonnes of coal during the year 2010-

11. Presently, about 90.72% of CIL's production comes from Opencast Mines.

3.3 ABOUT THE COMPANY

Name: -COAL INDIA LIMITED (CIL)

Date of incorporation:-21.10.1975

Corporate status:-The Company is incorporated under the Companies Act

1956, and is 90% owned by Government of India and 10% public Share

holding.

Business:-Engaged in the mining of coal, coal based products and mining

consultancy.


25/87

VISION:

To emerge from the position of domestic leader to leading global player in the

energy sector by adopting best practices from mine to market with due care to

environmental and social sustenance.

MISSION:

Produce the planned quantity of coal efficiently and economically with due

regard to safety, conservation & quality.

Coal India Limited was formed on 21st

October, 1975 as a holding company with five

subsidiaries:

Bharat Coking Coal Limited (BCCL),- Dhanbad Central Coalfield Limited (CCL),- Ranchi Western Coalfield Limited (WCL),- Nagpur region Eastern Coalfield Limited (ECL),- Asansol Central Mine Planning and Design Institute Limited (CMPDIL),- Ranchi

Several years Later, FOUR more subsidiaries were added:

Mahanadi Coalfield Limited (MCL),- Raurkela South Eastern Coalfield Limited (SECL),- Bilaspur North Eastern Coalfield Limited (NECL),- directly under control of coal

India limited

Northern Coalfield Limited, Singrauli (NCL),- Singrauli


26/87

3.4 CORPORATE STRUCTURE:

3.5 COAL RESERVES IN INDIA

Coal Reserves in India

Coal and oil are two primary energy resources in India. Coal forming about 85%

of coal production in India.

Coal Production of Last 5 years


27/87

The resources of Coal India are estimated to be around 43.65 million Tones

2006-2007 which constitute about 0.8% of global Coal reserves, whereas its

production contribution is around 7% India today one of the major coal

producers in the world and ranks at 3rd

position.

3.6 Production and Growth :

Produces over 400 Million Tonnes of Coal annually. Coal production ending

Financial Year 2011 was 431.32 Million Tonnes (MTs).

3.8 Cares for Environment :

Committed to minimize the adverse impact of coal mining on

environment through well structured Environment Management Plans and

sustainable development activities. As a part of 'Clean & Green' programme,

massive plantation has been taken up by CIL wherever land is available. CIL has

till date planted over 73 million trees. A positive result of this effort towards

improvement of environment.


28/87

3.9 Special Achievement :

1. The Utilization of Draglines, Dumpers and Dozers of WCL is FIRST in CIL,

while in case of Shovels, it is SECOND.

2. The Availability of Shovels, Dumpers, Dozers and Drills is higher than same

period of last year.

3.10 Core values :

Commitment.

Customer Satisfaction. Continuous Improvement. Concern for Environment. Creativity & Innovation.

3.11 LOCATION MAP :


29/87


30/87

30

FINANCE DEPARTMENT:- Organization Chart

DIRECTOR (FINANCE)

G.M G.M G.M GM G.M C.F.M

(finance) (corporate (cost & budget) (sales a/c) (internal (corporate

treasury) audit) a/c

& tax)

Dy. C.F.M

F.M

establishment Dy.C.F.M

F.M F.M F.M

(Administration& (sales a/c) (concurrence)

concurrance) Dy. C.F.M

F.M F.M

F.M F.M (cost& rev. (capital budget

(Expenditure) (Cash budget) &MIS)

Section) F.M F.M

F.M F.M

(fund mgmt) (derivative F.M F.M

transactions) (corporate a/c

(Indirect

& Tax) tax)


31/87

31

CHAPTER -IV

OBJECTIVES & SCOPES


32/87

32

OBJECTIVES, SCOPE OF THE STUDY

2.1Objectives of the study:-

1. To study the Capital Budgeting techniques required for financial investment of

company.

2. To study and understand the current trend, procedure & implement-ations of

capital budgeting techniques at WCL.

3. To analyze the tools and techniques used in preparing capital budget. 4. To understand the nature of capital expenditures.5. To estimate the total capital expenditure requirements for projects.

6. To approximate & establish the sources of capital to fund these projects.

2.2 Scope of the study:-

The scope of this project report is limited to the WCL in Nagpur. Experience of

working at the corporate level and knowing about various management strategies and

policies was very fruitful.

1. This research project aims at studying and analyzing the current practices of capital

budgeting at Western coalfields ltd. (WCL).2. The research project would help WCL to implement new and better techniques

of capital budgeting while evaluating new projects i.e. acquiring new coal mines.3. This study would help WCL to find out various ways to fulfill the capital

requirements of the company.4. It would help the company to improve the profit ability of their projects.5. This study is carried out using actual data and information provided by various sources

at WCL. CIL has complete monopoly in the production, trade and marketing of

coal. Hence, this study has a wide scope in the entire coal producing companies

and other subsidiaries of Coal India Ltd. (CIL).


33/87

33

CHAPTER V

RESEARCH METHODOLOGY


34/87

34

5.1 RESEARCH METHODOLOGY

Methodology used in the study:

For carrying out this study, a lot of efforts have been made. Through this

type of vast organization these efforts are normal but not irrelevant. It might have little

use but it is not so that it has no use. So we tried our level best for carrying out this study

and used following method to achieve these objectives of the study.

Research concerns itself with obtaining information through observation that can

be used to systematically develop logically related proportion so as to attempt to

establish casual relationship among variables.

- By Black and Champion.

Sources of Data

Data constitutes the subject matter of analysis. The relevance, adequacy and

reliability of data determine the quality of the study. There are various methods of data

collection which involves the use of specific recording forms. These are called tools or

instruments of data collection.

Data is primarily of two kinds;

1. Primary Data

2. Secondary Data

1. Primary Data:

Data that is collected for the specific purpose at hand is called as

primary data. It is customized according to the needs of the researcher and focuses

exclusively on the current research problem. The collection of the primary data is

time consuming. It calls for the greater planning and coordination. The primary

data has been collected by conducting formal & informal discussions with the

staff members WCL, Nagpur. Personal meeting with senior finance executives.


35/87

35

2. Secondary Data:

Secondary data means data that is already available in various reports, diaries,

letters, books and periodicals. Secondary data is that, which has been used previously for

any research and is now in use for the second time, is called Secondary Data. Secondary

data serves as a reference for the study.

The secondary has been collected from;

The companys annual reports

The companys brochure

Reference books

Magazines

WCL Intranet

Company Records

Personal meeting with senior executive:

After analysis of past records for understanding various things it was very important to

meet finance executives and managers. To understand the reason behind the increase or

decrease in profit it was indispensable to talk with the person who are directly involved in

this process. Therefore, I decided to talk with top officers, senior executives of thefinance and administration department. Thanks to all those managers and executives

whom I wished to talked and talked. They co-operated with necessary data and talk very

freely with me. Walk talked about past data, present scenario and even predicted about

the future.


36/87

36

Analysis of Past records:

Records of last years of trading and profit and loss accounts, balance sheet and cash flow

statement of WCL are collected.

Limitation:

Primary and secondary data has been collected from various resources but it was easy to

collect all the data due to safety reason and security concern. That is why some problems

had come in collecting data. I have tried my best for collecting data.


37/87

37

CHAPTER VI

THEOROTICAL BACKGROUND


38/87


39/87

39

Charles T. Horngnen has defined capital budgeting as "Capital Budgeting is long-

term planning for making and financing proposed capital outlays."

In other words, capital budgeting is the decision making process by which a firm

evaluates the purchase of major fixed assets including building, machinery and

equipment.

According to Hamption, John. 1, "Capital budgeting is concerned with the firm's

formal process for the acquisition and investment of capital."

From the above definitions, it may be concluded that capital budgeting relates to

the evaluation of several alternative capital projects for the purpose of assessing those

which have the highest rate of return on investment.

Capital budgeting is an assessment, where large finances are invested in the early

stages of the venture and the profits are expected over an extended period of time. These

decisions are related to allotment of capital to diverse long-term assets.

6.3 Features of investment Decisions

1. The exchange of current funds for future benefits.

2. The funds are invested in long-term assets.

3. The future benefits will occur to the firm over a series of year.

6.4 Importance of Investment Decisions

Investment decisions requires because of the following reasons: They influence the firms growth in the long run. They affect the risk of the firm. The involve commitment of large amount of funds. They are irreversible, or reversible at substantial loss. They are among the most difficult decision to make.


40/87

40

6.5 Types of Investment Decisions

One classification is as follows:

Expansion of existing business Expansion of new business Replacement and modernization.

Yet another useful way to classify investment is as follows:

Mutually exclusive investment Independent investment Contingent investment.

6.6 Investment Evaluation Criteria

Three steps are involved in the evaluation of an investment:

Estimation of cash flows Estimation of the required rate of return

Application of a decision rule for making the choice.

6.7 Three types of capital budgeting:-

1. Accept and reject decision.2. Capital rationing decision.3. Mutually exclusive choice decision.

1. Accept and Reject Decision:-

Proposal in which rate of return is more than the invested rate. i.e. output is

more that input. In this all independent project are accepted. Independent project are

those which is not complete with others.


41/87

41

2. Capital rationing decision:-

Capital rationing means distribution of capital in favors of more acceptable

proposals. A firm determines a certain point for selecting accepted proposals.

3. Mutually exclusive choice decisions:-

Mutually exclusive investment serves the same purpose and complete with each

other. If one investment is undertaken, other will have to be excluded.

6.8 Importance of Capital Budgeting

Capital budgeting decisions are of paramount importance in financial decision. So

it needs special care on account of the following reasons:

1. Long-term Implications: A capital budgeting decision has its effect over a long time

span and inevitably affects the companys future cost structure and growth. A wrong

decision can prove disastrous for the long-term survival of firm. On the other hand, lack

of investment in asset would influence the competitive position of the firm. So the capital

budgeting decisions determine the future destiny of the company. Not only the present

earnings of the firm are affected but the future growth and profitability also depend upon

investment decisions taken today. So a bad decision today can lead to a downfall

tomorrow.

2. Involvement of large amount of funds: Capital budgeting decisions need substantial

amount of capital outlay. This underlines the need for thoughtful, wise and correct

decisions as an incorrect decision would not only result in losses but also prevent the firm

from earning profit from other investments which could not be undertaken. Capital

Budgeting decisions usually involve large investments of funds but mostly there is a

shortage of funds at every firm. Hence the funds and the resources need to be controlled

by the firm.


42/87

42

3. Irreversible decisions: Capital budgeting decisions in most of the cases are

irreversible because it is difficult to find a market for such assets.

4. Risk and uncertainty: Capital budgeting decision is surrounded by great number of

uncertainties. Investment is present and investment is future. The future is uncertain and

full of risks. Longer the period of project, greater may be the risk and uncertainty. The

estimates about cost, revenues and profits may not come true.

5. Difficult to make: Capital budgeting decision making is a difficult and complicated

exercise for the management. These decisions require an over all assessment of future

events which are uncertain. It is really a marathon job to estimate the future benefits and

cost correctly in quantitative terms subject to the uncertainties caused by economic-

political social and technological factors.

6.9 Capital Budgeting Process

Capital budgeting is a process that involves making of investment decisions by a

company as to identify which project is profitable so that the company can invest its

capital. The crux of capital budgeting is the allocation of available resources to various

proposals. The crucial factor which influences the capital budgeting decision is the

profitability of prospective investment. Hence capital budgeting decisions are very vital

to any organization. It is a complex process as it involves decisions relating to the

investment of current funds for the benefit to be achieved in the future but the future is

always uncertain. The following procedure is adopted in process of Capital Budgeting.

Capital Budgeting Process:-

1. Identification of investment proposal.

2. Screening the proposal.

3. Evaluation of various proposals.


43/87

43

4. Fixing priorities.

5. Final approval & preparation of capital expenditure budget.

6. Implementing proposal.

7. Performance review.

1. Identification of investment proposal:-

The capital budgeting process begins with the identification of investment

proposal. The proposal or idea about potential investment opportunities may originate

from the top of management or may come from the rank and file workers of any

department or from any officers of the organization. The departmental head analyses the

various proposals in the light of the corporate strategies and submits the suitable

proposals to the capital expenditures planning committee in case of large organization or

to the officers a concerned with the corporate strategies and submits the suitable

proposals to the capital expenditures. Capital expenditures planning committee in the

case of large organization or the officers concerned with the process of long-term

investment decision.

2. Screening the proposal:-

The expenditures planning committee screens the various proposals received from

different departments. The committee views these proposals from various angles to

ensure that these are in accordance with the corporate strategies or selection criterion of

the firm and also do not lead to the department imbalances.

3. Evaluation of various proposals:-

The next step in the capital budgeting process is to evaluate the profitability of various

proposals. There are many methods which may be used for this purpose such as payback


44/87

44

period method, rate of return method, net present value method, internal rate of return,

etc. All these method of evaluating profitability of capital investment proposals have

been discussed in detail separately in the page of this chapter. It should be classified as

below.

i. Independent proposals.ii. Contingent or dependent proposals and

iii. Mutually exclusive proposals.

4. Fixing priorities:-

After evaluating various proposals, the unprofitable proposals may be rejected straight

away. But it may not be possible for the firm to invest immediately in the all the

acceptable proposals due to limitation of funds. Hence, it is very essentials to rank the

various proposals and to establish priorities after considering urgency, risk and

profitability involved there in.

5. Final approval & preparation of capital expenditure budget:-

Proposals meeting the evaluation and other criteria are finally approved to be included in

the capital expenditure budget. However, a proposal involving smaller investment may be

decides at the lower levels for expenditure action. The capital expenditures a budget lays

down the amount of the estimation expenditures to be incurred on fixed assets during the

budget period.

6. Implementing proposals:-

Translating an investment proposal into a concrete project is a complex, time consuming,

and risk- fraught task.

1. Adequate formulation of projects

The major reason for delay is insinuate formulation of projects put

differently, if necessary homework in terms of preliminary comprehensive

and detailed formulation of the project.


45/87

45

2. Use of the principle of responsibility accounting

Assigning specific responsibility to project managers for completing the

project within the defined time-frame and cost limits is helpful for

expeditious execution and cost control.

3. Use of Network Techniques

For project planning and control several network techniques like PERT

(Programme Evaluation Review Techniques) and CPM (Critical Path Method) are

available.

7. Performance Review:-

Performance review, or postcompletion audit, is a feedback device. It is a means for

comparing actual performance with projected performance. It may be conducted, most

appropriately. When the operations of the project have stabilized. It is useful several

ways.

I. It throws light on how realistic were the assumptions underlying the project.

II. It provided a documented log of experience that is highly valuable for decision

making.

6.10 Capital budgeting techniques:

Techniques of

Capital BudgetingTechniques

DCF Criteria NonDCF Criteria

NPV I.R.R. P. IPaybackperiod

Accounting Rateof Return


46/87

46

selecting capital budgeting proposals:

Techniques grouped in the following two categories:

1. Time adjusted (Discounted Cash Flow Criteria-DCF)

a) Net Present Value Methodb) Internal Rate of Return Methodc) Discounted payback periodd) Profitability Index(PI)

2. Traditional (Non-Discounted Cash Flow Criteria)

a) Average Rate of Return (ARR)b) Payback period (PB)

1. DISCOUNTED CASH FLOW CRITERIA

a) Net Present Value (NPV) Method:

The present value is the procedure recognizing the time value of money. Cash flow

streams at different time periods differ in value and can be compared only when they are

expressed in terms of a common denominator, i.e., present values.

The formula for the net present value can be written as follows:

[ ( )

( )

( )

( )]

Where,

C1, C2 .represent net cash inflows in year 1, 2..,

K is the opportunity cost of capital,

C0 is the initial cost of the investment and

N is the expected life of the investment.


47/87

47

The NPV Acceptance rules are:

1. Accept if NPV> 0

2. Reject if NPV< 0

3. May accept if NPV = 0

Example Assume that project X costs Rs. 2500 now and is expected to generate

yearend cash inflow of Rs. 900, Rs 800, Rs 700, Rs 600 and Rs 500 in years through. The

opportunity costs of the capital may be assumed to be 10%.

NPV = [Rs. 900 / (1+0.10) + Rs. 800 /() () )]

NPV= [818+661+526+410+310]-2500

NPV= 27252500= 225

Here, cash inflows (Rs. 2725) are greater than that of cash outflow (Rs. 2500).

Thus, it generates a positive net present value (NPV=+ Rs. 225). Therefore, it should be

accepted.

Advantages:

Time value: It recognized the time value of money-a rupee received today isworth more than a rupee received tomorrow.

Measure of truth profitability. Shareholder value: The NPV method is always consisted with objective of

shareholder value maximization.

Disadvantage:

Cash flow estimation: It is quite difficult to obtain estimates of cash flows due touncertainty for NPV method.

Discount Rate: It is also very difficult in practice to measure the discount rate.


48/87

48

b) Internal Rate of Returns (IRR):

IRR is defined as the rate of discount at which the present value of cash inflow andpresent value of cash outflow are equal.

[

]

The internal rate of return is defined as the discount rate that gives a net present value

(NPV) of zero.

( )

Where,

PVCO = Present value of cash outlay

PVCFAT = Present value of cash inflows

R = Either of the two interest rates

= Difference in interest rates = Difference in calculate present value of inflows.

IRR Acceptance Rule:

Accept the project when, r > k Reject the project when, r < k May accept the project when, r = k

Where, r = internal rate of returns & k = required rate of return or cut off rate.


49/87

49

MERITS:

Time value of money. Profitability measure: it considers all cash flows over the entire life of the project

to calculate its rate of return.

Share holder value: It is consistent with the shareholder wealth maximizationobjectives.

DEMERITS:

Multiply rate: A project may have multiply rates, or it may not have a unique rateof return.

Mutually Exclusive Projects: It may also fail to indicate a correct choice between

multiply exclusive projects.

c) Profitability Index:

It is the ratio of the present value of cash inflows, at the required rate of return to the

initial cash outflow of the investment. A profitability index number greater that 1

indicates an acceptable project, and is consistent with a net present value greater than 0.

The profitability index approach measures the present value of return per rupee invested.

The ratio is calculates as follows:

Rules for selection or rejection of a project:

1. If PI > 1 then accept the project2. If PI > 1 then reject the project


50/87

50

3. May accept if PI = 1The ratio is calculated as follows:

For Example,

If the initial outlay of a project is Rs. 500 and Rs. 200 in year 1 4. We assume rate of

discount as 10%. The PV of cash inflows at 10% discount rate is:

Year Inflows 10% DF PV

1 400 .909 364

2 300 .826 248

3 500 .751 376

4 200 .683 137

Total PV = 1125

2. Traditional / Non-Discounted Cash Flow Techniques:

a) Average Rate of Return:

The average rate of return (ARR) method is to measures the profitability of an

investment. It is based upon accounting information rather than cash flows. The most

common usage of average rate of return (ARR) expresses it as follows:


51/87

51

Where,

The average profit after taxes are determined by adding up the after tax profits

expected for each year of the project life and dividing the result by the no. of years.

The average investment is determined by dividing the net investment by 2.

Accept Reject Rule: This method will accept all those project whose ARR is higher

than the minimum rate established by the management and reject those projects which

ARR less than the minimum rate.

For Example: If an investment proposal considering a cost of Rs. 50,000 having life

expectancy of 5 years and no salvage value. Assuming the tax rate is 35% and the

firm uses straight line depreciation. The estimated cash flow before depreciation &

tax from the investment proposal are as follows:

Year CFBT Depreciation PBT TAX

(0.35%)

EAT

1 10000 10000 NIL NIL NIL

2 10692 10000 692 242 450

3 12769 10000 2769 969 18004 13462 10000 3462 1212 2250

5 20358 10000 10385 3635 6750

Total EAT (Earning After Tax) = 11250

= 9%


52/87

52

Advantages:

It selects alternative uses of fund. It considers saving over the entire life of the project. In addition to measuring the desirability of new investment on the basis of their

relative cash flow, a comparison is made of expected profitability. This is done

with the average rate of return, which is a ratio of the yearly average net earnings

after depreciation and taxes to the average investment.

Disadvantage:

The differential timing of receipts is not considered It ignores the time value of funds.

b) Payback Period Method:

The pay period method is the 2nd

traditional method of capital budgeting. It is simple and

perhaps, the widely employed quantitative method for appraising capital expenditure

decisions. It is defined as the number of years required. This method answers the

question How many years will it take for the cash benefits, to pay the original cost of an

investment. This method is also known as the payout method.

Advantages

1. It is an important guide to investment policy.2. It lays a great emphasis on liquidity.3. It is easy to understand, calculate and communicate to the other.4. The method enables a firm to choose an investment which yields a quick return on

cash funds.


53/87

53

5. It enables a firm to determine the period required to recover the originalinvestment with some percentage return and thus arrive at the degree of risk

associated with the investment.

6. The method is quite the simplest of all the techniques used by the industry. Ithelps in selection of those projects whose profits are high enough to reply the

amount invested within a particular number of years.

Disadvantages

1. The time value of money is ignored.2. The rapidity of incoming cash flow is the only measure of desirability3. There is no recognition of cash flow variation. One project may have cash inflow

of Rs. 6000, for the first year, Rs. 8000 for the second year and Rs. 10000 for the

third year. The second project may have cash flow of Rs. 10000 Rs. 8000 and Rs.

6000 for three respectively. If both the projects involved net cash outlays of Rs.

24000, the years paybacks period would yield more cash earlier and may,

therefore, be considered more valuable. This situation is not properly handled

under the payback method.

4. It does not indicate how to maximize value and ignores the relative profitability ofthe project.

5. It over emphasizes liquidity and ignores capital wastage and the wastage and theeconomic life of an asset.

6. It is only a rule of thumb method. It is often difficult to judge objectivelywhether one proposed project is superior to another and, if so, by how much.

7. It may choose highly risks project.


54/87


55/87

55

1.Depreciation

Type % of depreciation

Telecommunication Equipments 15.83Electronic Items 11.31

Heavy Earth Moving Machineries(HEMMs) 41.28

Side Dump Loader (SDL) 19.00

Load Haul Dumper(LHD) 15.83

0.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

As on 1.4.2010

As on 1.4.2010


56/87

56

Balancesheet

Particulars As on 1.4.2010

A. Fixed AssetsLand Freehold 19,151.83

Land Leasehold 2,594.67

Building 58,828.98

Plant & Machinery 257,299.42

Office Equipment 4,236.66

Railway Sidding 3,001.30Vehicles 5,050.20

15.83

11.31

41.28

19.00

15.83Telecommunication Eqipments

Electronic Items

Heavy Earth Moving

Machineries(HEMMs)

Side Dump Loader (SDL)

Load Haul Dumper(LHD)


57/87

57

Particulars

Additions

during

the year

Deductions

&

Adjustments

A. Fixed AssetsLand Freehold 837.86 12,406.18

Land Leasehold 545.14 -12,406.18

Building 1,358.74 49.33

Plant & Machinery 15,982.94 5,391.98

Office Equipment 101.43 0.47

Railway Sidding 0 0.00

-15000

-10000

-5000

0

5000

10000

15000

20000

Additions during the year

Deductions & Adjustments


58/87

58

Vehicles 10.65 70.01

Particulars

Total as on

31/03/2011

A. Fixed

AssetsLand Freehold 7,583.51

0.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

7,583.5115,545.99

60,138.39

267,890.38

4,337.62 3,001.30 4

Fixed Assets


59/87

59

Land Leasehold 15,545.99Building 60,138.39

Plant & Machinery 267,890.38

Office Equipment 4,337.62

Railway Sidding 3,001.30

Vehicles 4,990.84

Particulars As on 1.4.2010

B.DevelopmentProspecting & Boring 7,359.83

0.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

350,000.00

400,000.00450,000.00

Prospecting &

Boring

Expenditure Nationaliasation Total

Development

Development


60/87


61/87

61

Particulars

Additions

during the

year

Deductions &

Adjustments

B.DevelopmentProspecting & Boring 129.86 0

Expenditure 2,274.71 -0.24

Nationaliasation 0 0

Total 21,241.33 5,511.55

Particulars Total as on 31/03/2011

B.DevelopmentProspecting & Boring 7,489.69

Expenditure 57,572.98

Nationaliasation 906.56

Total 429,457.26


62/87

62

Particulars

As on

1.4.2010

Additions

during

the year

Deductions

&

Adjustments

Total as on

31/03/2011

A. Fixed Assets

B.DevelopmentPREVIOUS YEAR(2009) 398,699.46 21,793.35 6,765.33 413,727.48

0.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

350,000.00

400,000.00

450,000.00

Prospecting &

Boring

Expenditure Nationaliasation Total

7,489.69

57,572.98

906.56

429,457.26

B.Development

B.Development


63/87

63


64/87

64

050000

100000

150000

200000

250000

300000

350000

400000

450000 398,699.46

21,793.35

6,765.33

413,727.48

PREVIOUS YEAR(2009)


65/87

65

A Fixed Assets & B.Development


66/87

66

B.Capital Work In Progress(As On 1/4/2010)

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

As on 1.4.2010

Additions during the year


Total as on 31/03/2011


67/87

67

0

5000

10000

15000

2000025000

30000

As On 1/4/2010

As On 1/4/2010


68/87

68

B.Capital Work In Progress(Additions During the year)

0

2000

4000

6000

8000

10000

12000

14000 Additions during the year

Additions

during the year


69/87

69

B.Capital Work In Progress(Deductions & Adjustments)

-5000

500

1000

1500

2000

2500

3000

3500

4000

4500


Deductions

&

Adjustmen

ts


70/87

70

B.Capital Work In Progress

0

5000

10000

15000

20000

25000

30000

35000




71/87

71

Profit After Prior Period Adjustments

0

200

400

600

800

1000

1200

2006-07 2007-08 2008-09 2009-10 2010-11

PAT

PAT


72/87

72


73/87

73

EVALUATION OF CAPITAL BUDGETING

8.1 CAPITAL BUDGETING PRACTICES IN WCL:

The long term investment decisions are in two categories:

With respect to capital expenditure With respect to project selection.


74/87

74

CAPITAL EXPENDITURE:

A capital budget or expenditure is the estimated amount required by the various

department, project, and workshop, central and headquarters itself, for the purpose of

utilizing the amount against the expenditure which are estimated in advance and are of

capital expenditure in nature.

Capital budget or expenditure is controlled by the ministry of coal, where the

proposed capital is sent for approval by the ministry. Based on the budgeted figure,

capital expenditure is made.

In WCL CAPITAL BUDGET is prepared which is a manual comprising of area

wise projected Capital Expenditure, prepared firstly at area (LOCAL) level by the GM

and AGM of concerned area then is sent to head quarters at project and planning

department where these expected Capital Budget are compiled by the concerned officials

in the same department.

Once the Capital Budget is complied & finalized, it is then issued as area book

showing area wise estimated capital expenditure for each month. Our basis of these

projected budgets, the monthly Statement of Capital Outlay and expenditure of that

respectively month along with comparing it with the budgeted expenditure.

Regarding the payment of this Capital Expenditure, this is mainly done in two levels

or basis:

1. At Area Level:

Area wise payment is done by the remittance received by the Center or

Headquarter. The payments are made on the basis of release of funds from the

headquarters as per the estimated and sanctions made thereof:


75/87

75

2. At Central or Headquarters Level:

The payment is directly made from center headquarters for the HEMM.

The Capital Budget depends either on project report or approved scheme. Thetotal project evaluation is done by the CMPDI subsidiary company of the CIL,

holding company of CLL. CMPDI prepares the detailed project report and send it

to the CCL for approval after giving several presentations on some important

feasibility aspects. WCLs board of directors can approve the project up to 500

crore and for projects costing more than 500 crore, the respected project has to be

approved by the ministry of coal.

As stated earlier, the capital expenditure statement are prepared at regional

level and also at central level where based on the capital budget the estimated and

actual are compared and percentage achievement are shown in the statement

itself.

PROCEDURE FOR STARTING NEW PROJECT:

Starting a new project (mine) involved complex and elaborate procedure. These

can be listed as below.

1. The area is earmarked and called as a Block. For e.g. Magadh. Then thearea is drilled and coal reserve is proved. Geological Survey is done and raw data

is made a available: Moisture, quality, etc.

2. Next step is to prepare a Draft Project Report which is done by Central MinePlanning and Design Institute (CMPDI) LTD. The draft report is thensubmitted to WCL headquarters, project & planning Department (P&P).

Presentations are then given by CMPDI to the Head of Department (HOD) of all

departments Excavation, Mining, Finance, etc. As per suggestion, changes and

amendment are made to the draft PR.


76/87

76

3. Empower Sub Committee (ESC) is prepared. It mostly consists of FunctionalDirectors (FDs) and Independent Directors. Presentation are made to them

suggestion (if any) incorporated.

4. The Draft PR is then sent to Board of Directors for approval (Up TO 500 crs).Up to 500 crores : Approval by BOD, WCL

500 crs.1000 crs. : Approval by CIL

Above 1000 crs. : Approval by Ministry of Coal (MOC)

5. The DPR is then sent to ESC in Ministry of Coal for approval.

6. DRP is now sent to Public Investment Board (PIB) and the Draft PIB Note isprepared. The Secretary Expenditure again analyses the project and thereafter

recommends the project for approval (if any).

7. Cabinet Committee on Economics Affairs (CCEA) the evaluate the project ADraft CCEF note is prepared.

8. The final stage is Approval of Project with / without condition (subject to ForestryClearance). Zero Date of project if fixed.

PARALLEL ACTIVITY: ADVANCED ACTION

Advanced action consists of activities which are carried side by side while project is

being studied and evaluated for approval. These activities include.

I. Land AcquisitionII. Forestry Clearance


77/87


78/87

78

1. Principally agree with / without condition. Net present value of the land is calculated and the payment is

made.

2. Final release of the land.

III. EMP CLEARENCE

Environment Management Plan (EMP) is applied one month before the final

release of the land by forest department.

It analysis the effect of the project on the following aspects environment and its

degradation.

Air Water Noises Land

1. At this EOR (Form -1) and Term of Reference (TOR) is prepared and submittedto the Ministry of Environment. The ministry analysis the application and then the

project is finalized for approval.

2. Public Herring Minutes are given by the Population control Board. They givethere suggestion on whether there should be any chance or on chance in the

project.

MINUTES

Change

No

change


79/87

79

Then presentations are given by expert committee mining i.e. EC (M) illustrating the

projects:

Internal rate of return (IRR)It should be at minimum 12%.

Internal and extra budgetary resources (IEBR)Gives the details of sourceof capital Investment i.e. whether the company has surplus money to fund this

project or how the investment could be funded externally through Loans,

Financial Institution etc.

Variance Analysis

CCEA Note (Must)One all the above activities are completed, the project could be started.


80/87

80

CHAPTERIX

FINDINGS & CONCLUSIONS

9.1 FINDINGS & CONCLUSIONS:-1. WCL is a government organization subsidiary of CIL where the Capital

Expenditure upto 500 cr is approved at the WCL beyond this limit approved at

CCL.

2. It is learnt that the projects are evaluated based on 12% IRR.


81/87

81

3. Company has 83 working mines. There are of 38 opencast, 43 areundergrounds, 2 are mixed (OP+U/G).

4. The machinery required is mostly HEMM, Draglines, Dumpers and Dozers,Shovels, Drills.

5. Utilization of resources is extremely good at about above 100% based onstandards.

6. Depreciation on assets has been calculated by straight-line method dependingon the life of equipments.

7. The profitability of WCL is improving over a period.

CHAPTERX


82/87

82

RECOMMENDATIONS

10.1 RECOMMENDATIONS:-

1. There is a burocrasy system. Systems are very slow.

2. There is hierchy and approval takes very long time.

3. The methods of Capital Budgeting may be utilizes in an effective way.


83/87

83


84/87

84

CHAPTERXI

LIMITATIONS

11.1 LIMITATIONS OF THE STUDY:-

Though the project is completed successfully a few limitations may be there.

1. Coal India ltd. accounts for 90% of the coal production in India. It has

complete monopoly in the coal sector. Therefore, the data used for this study

are confined to CIL and not applicabl e to any other company.


85/87

85

2. Assumptions have been taken regarding analysis and interpretations of project

due to lack of proper data.

3. Certain data and information given in the research are hypothesized due to

highly confidential of such information.

4. Since the procedure and polices of the company will not allow to disclose

confidential financial information, the project has to be completed with the

available data given to me.

5. The period of study that is 9 weeks is not enough to conduct detailed study of

the project.

6. The study is carried down on base the information and documents provided by

the organization and based on the interaction with the various employees of

the respective departments.

7. Due to the large size of the organization and busy schedule of the staff there

was a little scope for frequent interaction with the guide and concerned

people.

8. Capital Budgeting Methods NPV, IRR, PI, ARR, Payback Period could not be

directly employed in the organization.


86/87

86

CHAPTER- XII

BIBLIOGRAPHY

12.1 BIBLIOGRAPHY:

A.TEXT BOOK:


87/87

Date post:	04-Apr-2018
Category:	Documents
Upload:	priti-rasegaonkar
View:	216 times
Download:	0 times

Final p Project Nw Chnges

Documents