Project Planning and Control

Jayesh Gharade​
[Link] Mechanical Engineering
MIS- 612210050

Assignment – Project Planning and Financial Analysis

Q1. Market Characterization & Demand Forecasting: A company is planning to launch a new
electric scooter in an urban market. - Explain how you would characterize the market using
SWOT analysis and interdependency relationship techniques. - Discuss how demand forecasting
methods (time series, survey, regression) can be applied to estimate the first 5 years of sales.​
​
Solution:​

​
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Interdependency Relationship Techniques

1.​ Fuel prices ↑ → EV demand ↑​

2.​ Govt. subsidies ↑ → Lower cost → Faster adoption​

3.​ Charging infra ↑ → Range anxiety ↓ → Sales ↑​

4.​ Consumer awareness ↑ → Perception shift → Market growth.​

5.​ Battery prices ↓ → Cost competitiveness ↑

Demand Forecasting for First 5 Years

1.​ Time Series Analysis (based on fuel price & EV adoption trend):​

○​ Use past petrol price growth (5–7% annually) → stronger shift toward EVs.​

○​ Early adoption curve (S-curve) expected → slow start, rapid growth, saturation.​

2.​ Survey Method:​

○​ Conduct consumer surveys in urban areas.​

○​ Gauge intent to switch from petrol to EV if subsidies & charging infra improve.​

○​ Helps estimate penetration rate in early years.​

3.​ Regression Analysis:​

○​ Sales forecast = f(fuel price, subsidy amount, charging infra, disposable income).​

○​ Example:​
Sales=a+b1(Fuel Price)+b2(Govt. Subsidy)+b3(Charging Infra)+b4(Income
Level)Sales = a + b_1(\text{Fuel Price}) + b_2(\text{Govt. Subsidy}) +
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b_3(\text{Charging Infra}) + b_4(\text{Income Level})Sales=a+b1​(Fuel

Price)+b2​(Govt. Subsidy)+b3​(Charging Infra)+b4​(Income Level)
○​ Captures interdependencies between factors.​

Illustrative 5-Year Forecast (Hypothetical)

●​ Year 1: 5,000 units (early adopters, subsidy-driven).​

●​ Year 2: 12,000 units (infra expansion, rising fuel prices).​

●​ Year 3: 25,000 units (consumer trust increases).​

●​ Year 4: 40,000 units (mass adoption).​

●​ Year 5: 60,000 units (market maturity).

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​
Q2. Screening of Project Ideas using Delphi & Rating Index An investor is considering three
possible startups: 1. A solar rooftop panel installation service 2. A cloud-based education
platform 3. A plant-based protein food startup - Apply the Delphi method to screen these project
ideas with expert opinions. - Design a Project Rating Index including parameters like capital
requirement, risk, profitability, and social impact. - Conclude which project is most feasible and
justify your choice.​
​
Solution:​
​
The Delphi method is a structured way of gathering opinions from experts in multiple rounds
until a consensus is achieved. Here, we consider three project ideas:

1.​ Solar Rooftop Panel Installation Service​

2.​ Cloud-based Education Platform​

3.​ Plant-based Protein Food Startup​

We assume a panel of five experts:

●​ Expert 1 (Energy Analyst)​

●​ Expert 2 (Venture Capitalist – VC)​

●​ Expert 3 (Food Industry Consultant)​

●​ Expert 4 (Technology Specialist)​

●​ Expert 5 (Government Policy Advisor)​

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Round 1 – Initial Opinions

●​ Solar Rooftop Panels​

○​ Energy Analyst: India’s rising electricity demand and government subsidies for
renewable energy make this highly promising. However, capital intensity is high.​

○​ VC: Attractive in the long run but ROI (Return on Investment) may be slow
compared to digital businesses.​

○​ Policy Advisor: Strong government push for renewables, net metering policies,
and carbon reduction targets support this idea.​

●​ Cloud-based Education Platform​

○​ Tech Specialist: Easy to scale, lower capital required, cloud infrastructure already
matured.​

○​ VC: Big potential but market already crowded with Byju’s, Unacademy, Vedantu →
differentiation will be challenging.​

○​ Policy Advisor: Govt. is pushing digital learning (NEP 2020), making it socially
relevant.​

●​ Plant-based Protein Food​

○​ Food Consultant: Global trend toward veganism, sustainable diets, and health
foods. Indian consumers are still price-sensitive and culturally meat-oriented, so
adoption may be slower.​

○​ VC: High profitability if niche markets (urban, premium customers) are targeted.​
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○​ Policy Advisor: Growing awareness about health & climate impact supports
plant-based protein.​

Round 2 – Feedback & Refinement

Experts review Round 1 opinions anonymously and adjust their views:

●​ Solar Rooftop Panels​

Consensus: Strong policy support and social impact, but needs patient capital and high
upfront investment.​

●​ Cloud-based Education Platform​

Consensus: Lower risk and faster scalability, but differentiation (AI-based
personalization, regional language content) is key to survival.​

●​ Plant-based Protein Food​

Consensus: High growth potential for the next decade, especially export opportunities.
Risk lies in changing consumer behavior in India.​

Round 3 – Final Consensus

●​ Most Feasible (short term): Cloud-based Education Platform​

●​ High Social & Policy Support: Solar Rooftop Panels​

●​ High Long-term Growth Potential: Plant-based Protein Startup​

Part B: Project Rating Index

We evaluate projects using four parameters:

1.​ Capital Requirement (weight 20%)​

2.​ Risk (weight 25%)​

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3.​ Profitability (weight 35%)​

4.​ Social Impact (weight 20%)​

Each parameter is scored on a 1–5 scale (5 = best).

Criteria Weight Solar Rooftop EdTech Plant-based

Platform Protein

Capital 0.20 2 (0.4) 4 (0.8) 3 (0.6)

Requirement
(lower is
better)

Risk (lower risk 0.25 4 (1.0) 3 (0.75) 2 (0.5)

is better)

Profitability 0.35 3 (1.05) 4 (1.4) 5 (1.75)

Potential

Social/Environ 0.20 5 (1.0) 3 (0.6) 4 (0.8)

mental Impact

Total Score 3.45 3.55 3.65

(out of 5)

Final Recommendation:

●​ For short-term feasibility & quick returns, invest in the Cloud-based Education Platform.​

●​ For long-term sustainable growth & high profitability, the Plant-based Protein Food
Startup is the best bet.​

●​ Solar Rooftop is recommended only for investors with large capital & long patience
horizon.
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Q3. Project Cost & Financing Plan A group of entrepreneurs plan to set up a packaged
drinking water plant. - Estimate the project cost under headings: land, building, machinery,
working capital, etc. - Suggest possible means of financing (equity, loans, subsidies, venture
capital). - Discuss the financial risks and how they can be mitigated in real practice.

Solution:

1. Estimation of Project Cost

Heads of Cost Description Estimated Cost (₹ Lakhs)

Land & Site Development Purchase of 5000 sq. ft. 20

industrial plot, fencing, leveling

Building & Civil Works Factory shed, office block, 25

utilities room, storage, sanitation

Plant & Machinery Water purification system (RO + 40

UV + Ozonator), filling machines,
labeling, conveyors,
compressors, generators

Furniture & Office Equipment Furniture, computers, air 5

conditioners

Electrical & Installation Wiring, transformers, panels, 5

installation cost

Pre-operative Expenses Consultancy, project registration, 3

legal & marketing expenses
before start

Working Capital (3 months) Raw water, packaging material 12

(bottles, caps, labels), salaries,
utilities, logistics

Contingency (5%) Buffer for unforeseen expenses 5

→ Total Project Cost ≈ ₹115 Lakhs (₹1.15 Crore)

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2. Means of Financing:

Source of Finance Description Amount (₹ Lakhs)

Promoters’ Equity Contribution by entrepreneur 35

group (30%)

Term Loan from Bank For building & machinery 60

(50%)

Government Subsidy / MSME Under PMEGP / State 10

Grant Industrial Scheme (10%)

Working Capital Loan (Cash Bank CC limit for 3 months 10

Credit) operations

Total Financing 115 Lakhs

3. Financial Risks and Mitigation:

Type of Risk Explanation Mitigation Strategy

Market Risk Demand fluctuation due to Diversify distribution (hotels,

seasonal sales or local retailers, online), strong
competition branding

Operational Risk Machinery breakdown or poor Regular maintenance, AMC

water quality with suppliers, strict quality
control

Financial Risk Loan repayment delays or Maintain DSCR > 1.5, buffer
cost overrun capital, phased project
execution

Regulatory Risk BIS/FSSAI compliance delays Early application, appoint

or license issues compliance consultant

Supply Chain Risk Shortage of raw water or Long-term vendor contracts,

bottles backup borewell

Environmental Risk Wastewater disposal, Install proper ETP, follow ISO

sustainability concerns 14001 standards
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Summary of Financial Viability :

1.​ Estimated Annual Sales: ₹200 Lakhs​

2.​ Operating Expenses: ₹150 Lakhs​

3.​ Net Profit Before Tax: ₹50 Lakhs​

4.​ Break-Even Point: 60–65% capacity utilization​

5.​ Payback Period: 3–4 years

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Q4. Break-Even and Projected Financials A company is setting up a solar panel

manufacturing unit with estimated fixed costs of ₹20 Cr and variable cost of ₹5,000 per panel. -
If the selling price is ₹8,000 per panel, calculate the break-even point in units and sales value. -
Prepare a projected cash flow statement and balance sheet extract for the first 3 years (assume
realistic growth in sales). - Discuss the implications for long-term sustainability of the project.

Solution:

1)​ GIVEN:

Particulars Amount

Fixed Costs (FC) ₹20 Crore = ₹2,000 Lakhs

Variable Cost (VC) ₹5,000 per panel

Selling Price (SP) ₹8,000 per panel

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3) Assumptions for Financial Projections:

Parameter Assumption

Installed capacity 1,50,000 panels/year

1st-year utilization 70% of capacity

Sales growth 15% per annum

Variable cost inflation 5% per annum

Fixed cost increase 5% per annum

Selling price increase 5% per annum

Tax rate 30%

Depreciation 10% of fixed assets (₹20 Cr)

4. Projected Financials (₹ Crore)

a) Projected Sales, Cost & Profit:​

Year Units Sales (₹ Variable Fixed Deprecia Profit Profit

Sold Cr) Cost Cost tion Before After Tax
Tax (PAT)
(PBT)

1 1,05,000 84.0 52.5 20.0 2.0 9.5 6.65

2 1,20,750 96.6 66.1 21.0 2.0 7.5 5.25

3 1,38,863 111.0 79.8 22.0 2.0 7.2 5.04

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b) Projected Cash Flow Statement (₹ Crore):​

Particulars Year 1 Year 2 Year 3

Cash Inflows

Sales Receipts 84.0 96.6 111.0

Cash Outflows

Variable Costs 52.5 66.1 79.8

Fixed Costs 20.0 21.0 22.0

Taxes Paid 2.85 2.25 2.10

Net Cash Flow 8.65 7.25 7.10

Add Depreciation 2.0 2.0 2.0

(non-cash)**

Total Cash Inflow 10.65 9.25 9.10

Available

c) Projected Balance Sheet (Extract, ₹ Crore):

Particulars Year 1 Year 2 Year 3

Fixed Assets (Net) 18.0 16.0 14.0

Current Assets 20.0 25.0 30.0

Cash & Bank 10.6 9.2 9.1

Net Worth (Equity + 25.0 30.3 35.3

Retained Earnings)

Long-Term Debt 23.6 20.0 17.0

Total Liabilities 48.6 50.3 52.3

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5. Interpretation & Long-Term Sustainability:

Aspect Observation Implication

Break-even Achieved at 66,667 panels, Project feasible beyond 50%

i.e. ~45% of capacity utilization

Profitability PAT positive from Year 1 Good operating margin

Cash Flow Positive every year Strong liquidity position

Leverage Gradual debt repayment Sustainable long-term

improves solvency

Growth potential Increasing solar adoption, Expanding market in

govt. incentives renewable energy

Risk Raw material (silicon) cost, Mitigate via local sourcing,

import dependency forward contracts