Unit 5: Preparation of bankable projects - Practice Quiz

1 What is the main purpose of a bankable project proposal?

2 Which section gives a brief overview of the entire biopesticide project?

3 Why is market analysis included in a biopesticide project proposal?

4 Which of the following is a fixed capital item in a commercial biopesticide unit?

5 What is working capital mainly used for?

6 Which information belongs in the technical plan of a biopesticide project?

7 What does production capacity indicate in a project proposal?

8 Which factor is most important when selecting a location for a biopesticide production unit?

9 Why should raw material availability be assessed before starting production?

10 What is the main purpose of quality control in biopesticide production?

11 Why are regulatory approvals included in a commercial biopesticide proposal?

12 Which document estimates the money entering and leaving the business over time?

13 What does the break-even point represent?

14 Which item is used to estimate expected sales revenue?

15 Who is a target customer for many agricultural biopesticides?

16 Which of the following is a suitable channel for marketing biopesticides?

17 What is the purpose of a marketing strategy in the project proposal?

18 Why is risk analysis necessary in a bankable project proposal?

19 What does a project implementation schedule show?

20 Why is the promoter's experience mentioned in a bankable proposal?

21 A market study estimates annual demand for a biopesticide at 40,000 litres. If the proposed plant is expected to operate at 70% capacity utilization, which nominal annual capacity is most appropriate?

22 Which evidence would most strongly support the sales forecast in a bankable biopesticide project proposal?

23 A biopesticide sells for ₹500 per litre, with a variable cost of ₹300 per litre. If annual fixed costs are ₹2,400,000, what is the break-even output?

24 A proposed unit has monthly cash operating expenses of ₹900,000 and an estimated cash conversion cycle of three months. Ignoring minimum cash reserves, how much working capital should be planned?

25 A project has annual cash available for debt service of ₹1,800,000. Annual loan principal and interest payments are ₹800,000 and ₹400,000, respectively. What is the debt service coverage ratio?

26 A project expects sales of ₹10 million, variable costs of ₹6 million, and fixed costs of ₹2 million. If sales volume falls by 15% while price and unit variable cost remain unchanged, what will the revised EBITDA be?

27 Regulatory testing requires nine months, while plant construction requires six months. If both activities can begin together and must be completed before launch, what is the minimum pre-launch period?

28 Quality testing shows that a batch has microbial potency below the registered specification. What action should be included in a credible quality-control plan?

29 Pilot fermentation produces 20 g/L of active biomass. Which approach gives the most defensible yield assumption for commercial-scale financial projections?

30 Farmers in the target market usually purchase crop-protection inputs from local agro-dealers and require guidance on application. Which marketing approach is most suitable?

31 A plant has a capacity of 60,000 litres per year, expected utilization of 75%, and a rejection rate of 4% of production. At ₹350 per saleable litre, what is projected annual revenue?

32 A proposed project reports annual profit after tax of ₹1.2 million and depreciation of ₹0.5 million. Assuming no other non-cash items or working-capital changes, what is annual cash accrual?

33 A biopesticide project requires an initial investment of ₹4 million and is expected to generate ₹1.6 million annually for three years. At a 10% discount rate, the three-year annuity factor is 2.487. What is the approximate net present value?

34 A specialized carrier material is available from only one supplier, creating a major production risk. Which measure would best improve the project's bankability?

35 Which method is most appropriate for justifying the selling price used in a bankable project proposal?

36 Product A provides a contribution of ₹160 per litre and requires two fermenter-hours per litre. Product B provides ₹120 per litre and requires one fermenter-hour per litre. If fermenter time is the only constraint and demand is sufficient, which product should be prioritized?

37 A project has annual fixed costs of ₹3 million and a contribution margin ratio of 40%. What is the break-even sales value?

38 A project schedule shows that commercial production depends on completion of registration, equipment installation, and trial batches. What is the best way to represent these dependencies in the proposal?

39 Which information would provide the strongest basis for claiming that a biopesticide offers farmers an economic advantage?

40 A biopesticide has a short shelf life, while monthly demand is uncertain. Which operating plan best reduces the risk of expiry-related losses?

41 A proposed biopesticide unit projects annual sales of ₹24 million, cash production and marketing costs of ₹14 million, cash administration costs of ₹2 million, cash taxes of ₹1 million, maintenance capital expenditure of ₹1 million, and a ₹0.5 million increase in working capital. Annual interest and principal repayments are ₹2 million and ₹3 million, respectively. What first-year debt-service coverage ratio should be presented?

42 A plant has capacity for 100,000 formulated units per year. Each saleable unit realizes ₹500 and incurs ₹220 of variable cost. Annual fixed cost is ₹19.6 million, and 12.5% of formulated units are expected to fail final quality release. At what capacity utilization does the project reach accounting break-even?

43 Two mutually exclusive biopesticide projects use the same discount rate. Project A has a 70% probability of regulatory approval, with an NPV of ₹12 million if approved and an NPV of −₹3 million if rejected. Project B has a 90% probability of approval, with corresponding NPVs of ₹9 million and −₹2 million. Which selection is financially preferable on expected NPV?

44 Monthly sales for the first four months are projected at ₹2 million, ₹2 million, ₹8 million, and ₹8 million. Customers pay exactly two months after sale, while cash operating costs equal 60% of sales and are paid in the month incurred. With no opening cash or supplier credit, what minimum working-capital facility is required through month 4?

45 A microbial biopesticide batch meets its release potency specification, but validated stability data predict that potency will fall below the label claim before the proposed 18-month expiry. Which treatment makes the commercial proposal most defensible?

46 The total crop area is 200,000 ha, of which 60% is reachable by the proposed distribution network. Expected adoption is 35%, the treatment requires two applications of 1 L/ha, and the enterprise targets a 25% market share. If only 92% of formulated output passes release testing, what annual formulation volume should be budgeted?

47 A proposal assumes annual sales of 100,000 units at ₹400 each, variable cost of ₹230 per unit, fixed cash cost of ₹12 million, and annual debt service of ₹4 million. If EBITDA approximates cash flow available for debt service, what is the maximum percentage price decline that preserves a minimum DSCR of 1.20, with volume unchanged?

48 For 60,000 kg of annual demand, in-house production would incur ₹4.8 million fixed cost, ₹110/kg variable cost, and ₹0.9 million expected annual contamination loss. Toll manufacturing would incur ₹0.5 million vendor-qualification cost, ₹180/kg processing cost, and ₹0.4 million expected logistics and spoilage loss. Assuming equivalent quality and capacity, which choice minimizes risk-adjusted annual cost?

49 A lender is willing to finance a biopesticide plant, but efficacy registration remains uncertain and most equipment has low resale value. Which financing structure best aligns lender exposure with project risk?

50 A biopesticide has an MRP excluding indirect tax of ₹1,000. Distributor and retailer deductions equal 7% and 18% of MRP, respectively, while seasonal schemes equal 5% of MRP. Variable production and outward freight costs are ₹360 and ₹40 per unit. What contribution per unit should be used in the proposal?

51 A product has a validated shelf life of nine months. Distributors require at least six months of remaining shelf life upon receipt. Quality release takes one month after manufacture, and transit takes half a month. What is the maximum permissible finished-goods holding time after quality release?

52 A revenue forecast includes sales against five crop-pest combinations, but the existing registration permits claims for only two. Trials for the other three are incomplete. How should a bankable base case treat the unsupported combinations?

53 A project plans to source a microbial strain from a research institution, but the draft proposal contains only a material-transfer agreement and no commercial license. Which risk most directly undermines bankability?

54 A plant requires an initial investment of ₹20 million and generates after-tax cash inflows of ₹6 million annually for four years. At year 4 it has ₹3 million salvage value and ₹1 million decommissioning cost. Given a four-year annuity factor of 3.037 and a year-4 discount factor of 0.636, what is the NPV?

55 Product A contributes ₹300 per unit and uses two fermentation hours; Product B contributes ₹220 per unit and uses one fermentation hour. Annual capacity is 6,000 hours, at least 1,000 units of A must be supplied, and B sales cannot exceed 4,000 units. Which mix maximizes annual contribution?

56 Imported ingredients represent 30% of a product's ₹200 unit cost. A 20% domestic-currency depreciation is fully passed into imported-input costs, while all other costs and the ₹350 selling price remain unchanged. By what percentage does unit contribution decline?

57 Fixed assets cost ₹30 million, pre-operative expenses ₹3 million, and initial working capital ₹5 million. A 10% contingency applies to fixed assets plus pre-operative expenses. Promoters provide ₹12 million and sanctioned term debt is ₹22 million. A ₹5 million grant is reimbursed only after commissioning, and the working-capital line is unavailable before production. What pre-commissioning funding gap remains?

58 Fermentation can produce ten 800-L batches monthly, with 90% downstream recovery. Formulation capacity is 6,500 L/month, filling capacity is 7,000 L/month, and 5% of formulated volume is expected to fail final release. What annual saleable output should support the revenue forecast?

59 One distributor is expected to generate 45% of revenue and requests 120-day unsecured credit, while the project's downside DSCR is already close to the lender covenant. Which revision most directly improves the proposal's bankability?

60 Without digital batch traceability, an annual recall has a 4% probability and would cost ₹12 million. A traceability system costs ₹0.25 million annually and reduces recall loss to ₹3 million without changing recall probability. Based only on expected annual cost, what should the proposal recommend?