ACA-TM-37 (v2.2-20-Nov-10)

Case Exercise of MI Project

ACA-TM-37 (v2.2-20-Nov-10)

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/-

Minor Irrigation Project

ACA-TM-37 (v2.2-20-Nov-10)

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

Installation of pump-set to lift water

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 monthsUseful life of pump-set: 9 yeras

ACA-TM-37 (v2.2-20-Nov-10)

Cash Flow StatementYear 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. 16,500Total investment: Rs.6,000

ACA-TM-37 (v2.2-20-Nov-10)

Calculation of NPW and BCRYear 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 @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 benefit:Rs.8239Investment :Rs.6000

ACA-TM-37 (v2.2-20-Nov-10)

Calculation of NPW and BCRYear 0 yr 1st year 2nd to 9th

year

Cost 6000 7500 10000

Benefit - 8000 12000

Net Benefit (-)6000 500 2000

DF @15% 0.870 3.902

Disc Cost 6000 6525 39020 PWC=51545

Disc Benefit 6960 46824 PWB=53784

NPW=PWB-PWC=53784-51545=2239BCR=PWB/PWC=53784/51545-1.04:1

ACA-TM-37 (v2.2-20-Nov-10)

Calculation of IRRYear 0 year 1st year 2-9 year

Cost 6000 7500 10000

Benefit - 8000 12000

Net Benefit (-)6000 500 2000

DF @ 20% 1 0.833 3.198

NPW @20% (-)6000 417 6396 +813

DF@25% 1 0.800 2.663

NPW@25% (-)6000 400 5326 (-)274

IRR = 20+5 *813/813-(-)274= 20+5*813/1087= 23.749