Case Exercise of MI Project

1

• Case Exercise of MI Project

2
Minor Irrigation Project

• A farmer having a water source like open well or
  canal nearby would like to invest on a pump-set
  to lift the water. Presently, he is cultivating
  only single crop and getting a net benefit of
  Rs.3,000/- per year.
• 2. On installation of pump-set, it would be
  possible to take two crops with some additional
  expenditure.During the first year production,
  expenditure is estimated as rs.4500/- for single
  crop, with a projected benefit if Rs.8,000/-.
• 3. Second year onwards, it is assumed that the
  farmer would take up 2 crops in a year with the
  production expenditure of Rs.7,000/- and a
  benefit of Rs.12,000/-

3
Installation of pump-set to lift water

• Project cost Rs.6000 i.e cost of pump-set

Particulars 1st Year 2nd Year onwards
Prod. Cost Rs. 4,500 7,000
Pre Dev. Income Rs. 3,000 3,000
Total Cost 7,500 10,000
Benefits Rs 8,000 12,000
Gestation period 6 months Useful life of
pump-set 9 yeras
4
Cash Flow Statement
Year 0 1st 2nd 3rd 4th 5th 6th 7th 8th 9th
Cost 6000 7500 10000 10000 10000 10000 10000 10000 10000 10000
Benefit - 8000 12000 12000 12000 12000 12000 12000 12000 12000
Net benefit (-) 6000 500 2000 2000 2000 2000 2000 2000 2000 2000
Total net benefit Rs. 16,500 Total investment
Rs.6,000
5
Calculation of NPW and BCR
Year 0 yr 1st 2nd 3rd 4th 5th 6th 7th 8th 9th
Cost 6000 7500 10000 10000 10000 10000 10000 10000 10000 10000
Benefit - 8000 12000 12000 12000 12000 12000 12000 12000 12000
Net benefit -6000 500 2000 2000 2000 2000 2000 2000 2000 2000
DF _at_15 1 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284
Present value of net benefit -6000 435 1512 1316 1144 994 864 752 654 568
Present value of net benefitRs.8239 Investment
Rs.6000
6
Calculation of NPW and BCR
Year 0 yr 1st year 2nd to 9th year
Cost 6000 7500 10000
Benefit - 8000 12000
Net Benefit (-)6000 500 2000
DF _at_15 0.870 3.902
Disc Cost 6000 6525 39020 PWC51545
Disc Benefit 6960 46824 PWB53784
NPWPWB-PWC53784-515452239 BCRPWB/PWC53784/515
45-1.041
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Calculation of IRR
Year 0 year 1st year 2-9 year
Cost 6000 7500 10000
Benefit - 8000 12000
Net Benefit (-)6000 500 2000
DF _at_ 20 1 0.833 3.198
NPW _at_20 (-)6000 417 6396 813
DF_at_25 1 0.800 2.663
NPW_at_25 (-)6000 400 5326 (-)274
IRR 205 813/813-(-)274 205813/1087 23.749