Attempt given questions based upon the following case studies.A company ABC is in the manufacturing of steel sections, used for construction of industrial sheds and general fabrication. ABC was set up with a state of the art, German steel plant, in mineral rich area, with availability of minerals for the next 25 to 30 years for this plant. In April 2010, company ABC invested(i) Rs.95.0 Crores in Plant and Machinery(ii) Rs.10.0 Crores in erection and commissioning of Plant(iii) Spent Rs.1.0 Crore on foreign trips for finalizing and inspection of machinery and Rs.1.5 Crores for transportation of all the plant, machinery & equipment to site(iv) Incurred an expenditure of Rs.25.0 Lakhs on inauguration of the plant and Rs.50.0 Lakhs on administrative and other expenses.The Company started commercial operations on October 10, 2012. After few years of successful operation, the promoters approached bank for finance in March 2017 to double the capacity.You are assigned by the banker to value ABC plant and to assess, fair market value of the plant and machinery installed in the premises. After the initial discussion with promoters and receipt of FAR, you visit the plant and hold discussion with production and maintenance personnel. After physical verification of the plant and production and maintenance data, following information is gathered by you,(i) Plant and machinery is latest and in good operating condition(ii) Raw material quality is very good, hence more people are thinking of setting up plants(iii) Economic life of plant and machinery is 25 years.(iv) Similar plant, made in China, can be installed with all costs inclusive, at Rs.98.0 Crores.(v) The cost index in April 2010 was 120, in Oct 2012 were 135 and in March 2017 are 175. You are requested by banker for valuation of plant and machinery as on 31st March 2017.
