FINANCIAL FEASIBILITY STUDY OF PALM SUGAR PLANTATION OF CV CITRA ABADI

• Main Author: Amrullah Achfa, Iklil
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/64443
• Institution: Institut Teknologi Bandung

CV CITRA ABADI is a food processing company that mainly produces “Dodol”, a form of sweet snacks. CV CITRA ABADI activities include raw materials sourcing, food processing, and distribution activities. CV CITRA ABADI looks to the idea of building own brown sugar plantation to cut down costs and increase competitive advantage among competitors in 2021. The company set to pour in about 7 billion IDR investment in 11 years to the palm sugar project. However, CV CITRA ABADI has not done financial feasibility analysis for the palm sugar project. So, this study has a purpose to conduct the financial feasibility analysis of the palm sugar project. The financial feasibility study will be analyzed using capital budgeting method and the result will be strengthen with risk analysis. This research’s data analysis is divided into eight stages. The first stage is to construct pro forma financial statement of the company in a condition of with and without palm sugar project, then calculate the WACC of the company. After that, FCFF of the company is made in a condition of with and without palm sugar project, and then calculate the incremental FCFF. Then analyze the financial feasibility using capital budgeting methods that includes NPV, IRR, PI, payback period, and discounted payback period. The last stage is risk analysis using sensitivity analysis and Monte Carlo simulation. The result of the financial feasibility study is that the palm sugar project is expected to generate NPV value of 13,716,221,852.11 IDR, IRR of 27.26%, PI of 2.179, 11.57 and 12.89 years in payback period and discounted payback period, respectively. The Monte Carlo simulation showed there are 6.19 % chance that the NPV will result in negative value. So, palm sugar project is financially feasible for CV CITRA ABADI to execute but still has risks in terms of brown sugar production output. This palm sugar project could reduce cost of goods sold for CV CITRA ABADI, knowing the risks available in palm sugar project and to increase competitive advantage among competitors. It is recommended to execute the project with additional on-site research and doing the risk mitigation of brown sugar production output. This research is limited to only asses financial aspect, assuming COVID-19 is ending in the end of 2020 and is limited to secondary research on the palm sugar plantation. This research assesses traditional snack originated from Kudus which seldom to be researched. For future research, on-site research is preferable to get most updated and accurate data.