The project is based on the following- 1) Internal rate of return (IRR) is the rate of return that will equate the present value of a multi-year cash flow with the cost of investing in a project The IRR is the discount rate that renders the NPV of the project equal to zero 2) Profitability index also called as Benefit- Cost ratio or desirability factor is relationship between present value of cash inflow and the present value of cash outflow.

1. FINANCIAL
MANAGEMENT II
UM19138 || UM19150 || UM19148 || UM19170 ||UM19177 || UM19187
GROUP - I

2. OUR COMPANY
BPCL

3. WHAT WE ARE WORKING ON
Analysis of Capital
Investment in
Ethylene Cracker
Plant by BPCL

4. I R R
• Internal rate of return (IRR) is the
rate of return that will equate the
present value of a multi-year
cash flow with the cost of
investing in a project
• The IRR is the discount rate that
renders the NPV of the project
equal to zero
A

5. Profitability Index
• Profitability index also called as Benefit- Cost ratio or
desirability factor is relationship between present value
of cash inflow and the present value of cash outflow.
• It is also a time adjusted method of evaluating
investment proposal
• PROFITABILITY INDEX = PRESENT VALUE OF CASH INFLOW
PRESENT VALUE OF CASH OUTFLOW

6. CASH FLOW
Year Cash Flow
0 $ (2,50,00,00,00,000)
1 $ 2,61,41,52,356
2 $ 2,96,73,24,339
3 $ 3,36,82,09,857
4 $ 3,82,32,55,009
5 $ 4,33,97,76,761
6 $ 4,92,60,80,601
7 $ 5,59,15,94,090
8 $ 6,34,70,18,452
9 $ 7,20,45,00,645
10 $ 8,17,78,28,682
11 $ 9,28,26,53,337
12 $ 10,53,67,39,802
13 $ 11,96,02,53,350
14 $ 13,57,60,83,577
15 $ 15,41,02,12,468
16 $ 17,49,21,32,173
17 $ 19,85,53,19,229
18 $ 22,53,77,72,857
19 $ 25,58,26,25,970
20 $ 29,03,88,38,739
21 $ 32,96,19,85,853
22 $ 37,41,51,50,141
23 $ 42,46,99,36,925
24 $ 48,20,76,25,404
25 $ 54,72,04,75,596
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35
-3E+11
-2.5E+11
-2E+11
-1.5E+11
-1E+11
-5E+10
0
5E+10
1E+11
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
CASH FLOWS
Year Total Value(sum) at the end of year

7. RESULT ANALYSIS
40%
10%
DATABASE
20%
PROGRAMMING
30%
WEB DESIGN
UX RESEARCH
RESULTS
Entity Value
Payback Period (years) 20.77
Discounted payback period (years) 30.67
Internal Rate of Return (IRR) (%) 3.17%
NPV (Net present value) (₹) (12,08,96,75,955)
Profitability Index 0.95

8. ASSUMPTIONS
Cash inflows are calculated using the industry average profit margin in petrochemical industry
This ratio is multiplied with 25,000 crores to get the revenue generated from this
project in the 1st year and for subsequent years, we have multiplied the 1st years
revenue with growth rate which is the Retention ratio*ROE
The ratio of revenue to capital employed is same before and after the investment

9. CONCLUSION
The payback period is
very long at 20.77
years. If we don't
consider the life of the
project. The discount
payback period is 30.67
years
Our IRR is very low at
3.18% which is less
than WACC and also
our NPV up to 30 years
is negative
Our profitability index
is less than 1 at 0.95.
Hence, this project is not viable

10. THANK YOU !
Does anyone have any question?