INVESTMENT PROJECT ANALYSIS OF NEW PRODUCTION FACILITY (A CASE STUDY OF PT BFM)

• Main Author: ANISA 29116129, DYLA
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/26817
• Institution: Institut Teknologi Bandung

PT BFM is one of the companies engaged in vaccine manufacturers. It has experienced a decline in <br /> <br /> <br /> <br /> sales revenue in 2016 by Rp 30.16 billion or by 1.29% from the previous year because of polio type 2 <br /> <br /> <br /> <br /> eradication initiated by the World Health Organization (WHO). Since polio vaccine export sales <br /> <br /> <br /> <br /> contribute the most to the company's net sales revenue, PT BFM must anticipate the increasingly <br /> <br /> <br /> <br /> eroded market of polio vaccine due to the global eradication program. Measles vaccine is a vaccine <br /> <br /> <br /> <br /> whose demand is forecasted to be still high because many countries in the world obligate their <br /> <br /> <br /> <br /> societies to be immunized with measles-based vaccines. The high demand for measles vaccine is <br /> <br /> <br /> <br /> utilized as a new revenue generator for the company, replacing the old revenue generator whose <br /> <br /> <br /> <br /> demand has dropped i.e. polio vaccine. However, the opportunity to maximize the sales is hindered by <br /> <br /> <br /> <br /> the limited capacity of existing measles bulk production facility. PT BFM would like to increase its <br /> <br /> <br /> <br /> capacity by investing in a new measles bulk production facility which is planned to be built either in <br /> <br /> <br /> <br /> modular-, concrete-, or steel-based construction. Thus, the main purposes of this research are to <br /> <br /> <br /> <br /> conduct an investment project analysis in order to find out the financial feasibility for each <br /> <br /> <br /> <br /> construction option, to select which construction is financially most feasible, and to determine the <br /> <br /> <br /> <br /> variables that greatly affect the investment returns. <br /> <br /> <br /> <br /> In this study, Discounted Cash Flow (DCF) is used as a valuation method to estimate the attractiveness <br /> <br /> <br /> <br /> of investment opportunity. DCF method uses Free Cash Flow to The Firm (FCFF) projections and <br /> <br /> <br /> <br /> discounts them using a required discount rate, to arrive at present value estimates. Some decision <br /> <br /> <br /> <br /> parameters used are Payback Period (PBP), Net Present Value (NPV), and Internal Rate of Return <br /> <br /> <br /> <br /> (IRR). According to research explorations, all of the construction options are feasible to be executed, <br /> <br /> <br /> <br /> yet the most financially feasible option is concrete-based construction. It generates the NPV and IRR <br /> <br /> <br /> <br /> for Rp 258,107 million and 17.56%, respectively. While its payback period is 11.8 years. Sensitivity <br /> <br /> <br /> <br /> analysis reveals that the investment returns are highly sensitive to the changes in both sales price and <br /> <br /> <br /> <br /> Weighted Average Cost of Capital (WACC).