Case 2 : Project Appraisal and Working Capital Financing

Case Scenario :

Green pack Ltd., a mid-sized packaging firm in Gazipur is planning to expand its productions capacity to meet growing market demand. The company has approached your bank for a term loan to finance new machinery and also for a working capital limit to support its growing operations. The management has submitted a detailed project proposal including capital expenditure, projected revenues, break-even analysis and working capital requirements. However, there are concerns regarding the accuracy of their financial projections, cost estimations and the company's ability to service the debt.

Key Information from Greenpack's Proposal :

Total Project Cost : BDT 2.5 crore

Proposed Loan : Term Loan-BDT 1.5 crore
                             Working capital -BDT 0.5 crore

Projected Internal Rate of Return (IRR) : 14%

Debt to Equity Ratio after Loan : 80 : 20

Sensitivity analysis shows profitability drops significantly with just 10% increase in input costs.

Tasks :

As a credit officer in charge of evaluating this proposal, prepare a comprehensive appraisal covering the financial and non-financial aspects of the project. Recommend whether to approve the loan and on what terms.