This document discusses a study on the capital budgeting process of Vijaya Dairy Limited in Nellore, India. It begins with an introduction to capital budgeting and investment decisions. It then provides background on the dairy industry and profiles Vijaya Dairy, including its founding, operations, and products. The objectives, need, scope, and limitations of the study are outlined. Several capital budgeting techniques are discussed including payback period, accounting rate of return, net present value, and internal rate of return. Key findings are that investment proposals are evaluated using these techniques and those that meet acceptance criteria are approved. Suggestions for improvement and the conclusion that capital budgeting techniques help estimate future cash flows and evaluate investments are provided.

2. TITLE OF THE
PROJECT

3. A STUDY ON
CAPITAL BUDGETING OF
VIJAYA DAIRY LIMITED, NELLORE
By

4. Under the guidance of

5. INTRODUCTION

6. • The capital investment refers to the
investment in various fixed assets whose
returns would be available only after a year.
• The investment in fixed assets will be quite
heavy and to be made immediately, but the
returns will be available after a period of one
year.
• The investment decision of a company are
commonly called as the capital budgeting
decisions or capital expenditure decisions.

7. • Generally, the company’s capital budgeting
decisions include additions, disposition,
modification and replacement of fixed assets.
• Capital budgeting decisions are among the most
crucial and critical business decisions. A number
of factors are responsible for capital budgeting
decisions.
• The capital budgeting process involves generation
of investment proposals, estimation of cash flows
for the proposals, evaluation of cash flows,
selection of projects based on acceptance
criterion, and finally the continual revaluation of
investment after their acceptance .

8. INDUSTRY PROFILE

9. • India is predominantly an agrarian economy
with more than 75% of its Population living in
villages and depending on agriculture and
allied for their livelihood.
• Land and cattle have traditionally been the
tow basic income yielding assets of Indian
farmers. More than 70%of rural households
pass a mere 21.8% of land holdings. They
however own as much as 68.8% of total milk
animals.
• In terms of actual number, the poor marginal
farmers and landless laborers from the largest
group of rural milk producer.

10. • India has a great culture and custom, praised by
all over the world. The sacred Vedas and some
religious books stated that cow is considered as
“mother of mankind” and called Kamadhenu. In
ancient India literature, cow was treated as
sacred animal. It is still being accepted most of
the communities in India.
• Dairying is an art of rearing cows and other milk
yielding cattle has been an internal part of rural
society. The genesis of dairy industry in India is
as old Indian civilization.

11. COMPANY PROFILE

12. • The Vijaya Milk Dairy which is the first dairy industry
in Nellore district was started in the year 1969 the
actual name of Vijaya Milk Dairy is the Nellore
District Milk Producer’s Mutually Aided Co-operative
Ltd. The Nellore dairy was started with initial
capacity of 12,000 liters per day mostly to collect
milk from surrounding villages.
• Afterwards due to increase in procurement the
handling capacity was expanded to 40,000 liters per
day during the year 1979.
• The milk chilling centre at Kavali was started during
the year 1977 with an initial capacity at Venkatagiri
was started during the year 1981 with same
capacity.

13. • An average the Nellore dairy collects 4,24,000 Lts of
milk per week.
• The annual sale of By-products on an average will be
around 9,10,000.
• At present nearly 110 members are working on
permanent basis and 215 members are working on
temporary basis in Vijaya dairy. it is having all the
functional departments like finance, marketing,
production and H.R. departments.
• Today APDDCF offer the widest spectrum of milk
products in India, under the brand name VIJAYA.
These include ghee, butter, processed cheddar
cheese and cheese spread, flavored milk, skim milk in
tetra packs, sterilized.

15. OBJECTIVES OF THE STUDY

16. • To study the capital budgeting process in Vijaya
dairy.
• To know the value of the money.
• To know the discounting factors of the inflows of
the company.
• To analyze and access the financial capability of
the investment proposal using the traditional
and modern methods of capital budgeting
techniques.
• To analyze whether or not funds should be
invested in long term projects such as setting of
a company.

17. NEED FOR THE STUDY

18. • Understanding the past is a prerequisite for
anticipating the future. Thus, capital budgeting is
the starting point for making plan before using any
sophisticated planning procedures.
• It is the overall responsibility of the management to
see whether the resources of the firm are used
most effectively& efficiently and that the firm’s
financial condition is sound.
• It is necessary to note that a capital budgeting
reflects a quantitative relationship which helps to
form a qualitative judgment
• As a whole, it is necessary for management student
to complete the project work as a part of fulfillment
of master degree

19. SCOPE OF STUDY

20. • Understanding the importance of the capital
budgeting in Vijaya dairy.
• Evaluating an investment proposal of setting
up facility at Vijaya dairy.
• Capital budgeting investment used to develop
the dairy industry.
• This study reveals the present liquidity and
profitability position of the company.
• The study will enable the company to plan for
it’s were end will as basis for research work of
financial performance to be done in future.

21. LIMITATIONS OF THE STUDY

22. • Due to the confidential records the data not
exposed so the study may not exposed, so the
study may not be full-fledged.
• Detailed analysis could not be carried for the
project work because of the limited time span.
• The entire analysis is made with the help of
historical data. It just states what actually
happened but fails to state why it is
happened.
• Time constraint limed to my study.
• The study is restricted for a period of 5 years.

23. CAPITAL BUDGETING
TECHNIQUES
Traditional
Or
Discounting method
Payback period
Accounting rate
return
Time adjusted
Or
Modern method
Net present value Profitability index
Internal rate of
return

24. FINDINGS

25. • The Nellore District Milk Producers Mutually Aided Co-operative
Union Ltd. is follows the investment decision of expansion of
existing business.
• After estimation of cash flows and evaluation of cash flows, for
selected proposals. Which is satisfies the company standard
norms those projects are accepted for investment.
• The project is accepted when pay back is less than 2 years 1
month which is standard pay back set by the management. The
PBP is 2.1 years is accepted.
• As per the management the minimum rate of return expected is
40% .The project Average Rate of Return grater than 40% is
accepted. The ARR is 108.8 % is accepted.
• The net income of the project is discounted at the minimum
required rate return is 10% and Net Present Value is positive so
the project is accepted. The NPV is positive i.e.37967.45.
• The project showing profitability Index is more than one. so the
project is accepted. The PI is 2.02 year is accepted.
• Capital invested which project is generates returns more than
the10%.

26. SUGGESTIONS

27. • The company has to make new schemes to their customers it has reach
the goal.
• The man power in the organization is more so there is scope to reduce
the cost on employees.
• The organization is small compare with other branches so it mobilize
their services to customers correctly the financial position will be
increased.
• Technique should be applying to the projects differentially from period
to period (i.e., one year to another year)
• When discounting methods applying to the projects profitability
maximize the wealth of the share holders, as they require rate of return
to share holders to more than the cost of capital.
• The firm should increase it investment in current assets like short term
investment.
• The firm should increase its debtors and should collect receivables with
in timeframe.
• Firm should maintain stable sales for communication productivity.
Firm should have adequate working capital to meet unexpected demand.

28. CONCLUSION

29. • According to the study the capital budgeting
techniques are very useful to estimate future
inflows relating to the purchasing power and
time value of money.
• After analyzing the capital budgeting
techniques in tradition the modern methods
are very useful investment techniques to The
Nellore District Milk Producers Mutually Aided
Co-operative Union Ltd.

30. THANK YOU