CASE

DEVELOPMENT
PROJECT INFORMATION

• Construction period: 1 Year

• Capital Structure
– 65% Debt (Amortized within 10 years period, 9% interest rate)
– 35% Equity
• Tax rate: 25%
• Intangibles asset (Patent) is financed in the form of preferred stock
• Dividend of preferred stock 8% p.a. (non-accumulated)
• Dividend Payout Ratio is 42%
PROJECT INFORMATION

• Company
PT. AGRI, subsidiary of PT. TBLA(historical data provided)
• Industry
Agriculture Industry, with average sectoral GDP growth of 1.14% p.a.
• Project
Development of New Plants for Crude Palm Oil (CPO)
• Historical inflation rate data are provided
INVESTMENTS
• Initial Capex in Year 0
Investment Value Capacity Asset Life Salvage Value
Land IDR 100 Bio
Plant IDR 150 Bio 10K litter p.a. 20 Years 20%
Equipment IDR 100 Bio 5K litter p.a. 16 Years 10%
Intangible IDR 30 Bio 20 Years 0%
Working Capital As Needed

• Additional Capex in Year 1

Investment Value Capacity
Plant IDR 80 Bio 5K litter p.a.
Equipment IDR 40 Bio 3K litter p.a.
• Additional Capex in Year 3
Investment Value Capacity
Plant IDR 60 Bio 4K litter p.a.
Equipment IDR 30 Bio 2.5K litter p.a.
REVENUE PROJECTION

• Quantity sold will be projected using MA3 based on historical data (provided).
• The target market shares are estimated to be:
Year Market Share
1 10%
2 12%
3 15%
4 onward 20%
• Product price per unit will be projected using trend based on historical data
(provided).
• Market Price will be projected using MA5
PRODUCTION COSTS

• To produce the product, the company estimate a production costs that will
build up Cost of Goods Sold as follows:
Direct Material 25,000.00 per unit Increase as much as inflation rate
Direct Labor 72,058,000,000.00 per year Increase as much as inflation rate
Overhead 131,585,000,000.00 per year Increase as much as inflation rate
EXPENSES

• Selling Expenses will be projected as percentage of sales for the whole

projection period.
• G&A Expenses for the first year will be projected as percentage of sales and
will increase annually as much as inflation rate for the rest of projection
period.
• Corporate tax rate applied for the company is 25% of net profit before tax
(tax-loss carry forward will not be applied).
CURRENT ASSETS AND CURRENT
LIABILITIES
• 45% of sales will be on credit.
• Purchasing will be 80% of COGS.
• Account Receivable, Inventory, and Account Payable will be projected using
average historical Average Collection Period, Average Age of Inventory, and
Average Payment Period (assuming 365 days in a year).
• Accruals will be projected as percentage of G&A Expenses.
FINANCING

• Intangibles Asset (in the form of patent) will be financed by preferred stock
with fixed dividend of 6% p.a. payable by the company if Net Income is positive
(non-accumulative).
• 50% of new Capex in Land, Plant, Equipment, and Working Capital will be
financed by long-term debt with fixed payment for 10 years period (9% p.a.
interest rate will be applied).
• 50% of new Capex in Land, Plant, Equipment, and Working Capital will be
financed by Common Stock with assumption that all residual earnings will be
retained.
• Short-term debt will be used as needed.