A STUDY ON Project Finance WITH REFERENCE TO RASHTRIYA ISPAT NIGAM LTD, VISAKHAPTNAM

♦It should help to choose among mutually exclusive projects, those projects that maximise the shareholder’s wealth. ♦It should be a criterion, which is applicable to any conceivable investment project independent of others.

Familiarity with the capital budgeting techniques will facilitate an easier understanding of costs and benefits risk analysis and cost of capital.

Economists, Accountants, and others have suggested more than thirty criteria to judge the worthwhileness of the capital project. Some techniques are general and applicable to wide range of projects and some are specialized and suitable for certain types of investments and industries.

The investment criteria or techniques are classified into two broad categories1.Discounting criteria a. Net present value β b. Internal rate of return c. Profitability index d. Net operating benefits per unit of investment method 2.Non discounting criteria a. pay back period b. Accounting rate of return c. Debt-service coverage ratio d. Cost effectiveness analysis 1. NET PRESENT VALUE: N.P.V is a modern method of evaluating investment proposals. This method takes into account the time value of money and calculates the return on investment by introducing the factor of time element, i.e. NPV recognizes the fact that a rupee earned today is worth more than a rupee tomorrow. The net 57