Financial Feasibility Study of New Manufacturing Facility in China (PT. KUE ENAK)

• Main Author: Elsa /29116401, Felicia
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/27272
• Institution: Institut Teknologi Bandung

PT. KUE ENAK formerly a home scale business industry has transformed into the largest biscuits producer in the world. Now, PT. KUE ENAK owns several large scale factories and has entered the international market. China is one of PT. KUE ENAK’s export country destinations since 2013 with a large number of sales and has become the number one brand in the sweet biscuit category in China. In 2017, China has a population of 1,409,517,397 therefore PT. KUE ENAK is certain that they can expand their market share and increase their sales. Besides, every sale in China is relying on imported product made in the factories in Indonesia. This makes the delivery cost to be high and it requires 9 days to send the products. Therefore, in order to increase their market share, reduce the import cost and to maintain the quality of the products, and to avoid any future customs, PT. KUE ENAK decided to build a factory in China. <br /> <br /> <br /> This project is intended to provide the financial feasibility of opening a manufacturing facility in China. The factory is designed with the capacity of 20-30% from the forecasted revenue while the rest are still relying on import from Indonesia. The construction required 1.5 years (July 2018 – December 2019) where the manufacturing facility can hold up to four modular with a capacity of ± $ 70 million each. In the beginning, the factory will start with one modular and the addition of the other three modular will be added each year (2020-2022) after the factory is operating. The financial aspects calculated are NPV, IRR, PP and PI as a standard in taking the decisions. Other measurements to help the owner to mitigate the risks are the sensitivity analysis towards China’s inflation rate and the CNY/USD exchange rate. <br /> <br /> <br /> The results from the financial feasibility are: The Net Present Value (NPV) is $ 670,214,819.56, Internal Rate of Return (IRR) is48.52%, Payback Period (PP) is 5 years 8 months, and the Profitability Index (PI) is 7.91. Based on the sensitivity analyses on the inflation and CNY/USD exchange rate towards the NPV, the company will still obtain a positive NPV. The inflation does not affect the company as much as the CNY/USD exchange rate. With a 95% confidence level, the exchange rate can give a fluctuating NPV range of $ 66,113,361.43 which is from $ 629,152,065.37 – $ 695,265,426.80whereas inflation gives a fluctuating NPV range of $ 16,137,591.16 which is from $ 662,428,847.73 – $ 678,566,438.89.From the above results, it is concluded that the project is feasible to be proceed. The company should pay close attention to the CNY/USD exchange rate and the current market situation which has given a large impact on their revenue. <br /> <br /> <br />