#TITLE_ALTERNATIVE#

• Main Author: SUMA AJI (NIM 19005024), RANGGA
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/11211
• Institution: Institut Teknologi Bandung

Price of mining commodities is getting higher nowadays. Companies that use mining commodity as raw material will be hard to face this condition. They have to think more how to overcome the increasing price of raw material so the <br /> <br /> company’s profit will still high. One of company facing this condition is PT. XYZ (in the next section will mentioned as XYZ).<p> <br /> <br /> XYZ is a public company that runs in automotive support business, which is producing car wheel rims. The primary raw material of XYZ is aluminum (ingot), besides XYZ also use other supportive material such as titanium, strontium, magnesium, etc.<p> <br /> <br /> In overall, XYZ financial performance was not satisfying. From 2003 until 2006 the net sales of rims are increasing, but on the other hand the net profit is decreased. Furthermore in 2007 the net sales were fallen down.<p> <br /> <br /> In order to fix up XYZ financial condition, management proposed a new strategy to make their financial performance better. Based on their current assumption, the cause of the bad condition of their financial performance is the increasing of raw material price, while in the other side they could not increase the product price easily. Their new strategy is by investing in new machine that could produce new variant of rims, which is chromed rim. Management claimed that by having chromed rims they could produce rims relatively in the same COGS with ordinary rim (painted rim), but it has higher price in the market, and this means higher margin for XYZ. By having higher margin profit they could fix up their financial performance to be more profitable.<p> <br /> <br /> The analysis will begin on the finding of the root cause of financial problem of XYZ, projection calculation of new investment, Scenario analysis, What-if analysis, and Sensitivity analysis. The reference used in this project is from Managerial Finance by Lawrence J. Gitman, Corporate Finance by Westerfield Ross, Engineering Economy by William G. Sullivan, Ellin M. Wicks and James T. Luxhoj, and Corporate Finance by Aswath Damodaran. From Analysis of XYZ historical data it concluded that the root cause of financial problem of XYZ is the increasing price of raw material which is aluminum (ingot).<p> <br /> <br /> Projection of the new investment is made based on most likely scenario. From projection of cash budgeting it concluded that with the existing investment in Machine and Net Working Capital Addition the Cash flow of new investment is never negative, so it could concluded that the new investment will not disturb current XYZ operation.<p> <br /> <br /> From most likely scenario it concluded that the new investment is can generating more profit to XYZ, which proved with NPV 137 billion, IRR 30%, and Discounted Payback Period in 4 years 4 months.<p> <br /> <br /> From What-if analysis concluded that the most important variables are selling price, sales quantity and Rupiah currency. Furthermore the new investment is profitable and acceptable in all condition in What-if analysis.<p> <br /> <br /> In Tornado Diagram it concluded that the 3 most sensitive variables that affect to profit is Unit Price for 20 inches, Unit Price for 22 inches, and Direct Labor and Overhead Cost.