PRICE IDENTIFICATION AND FINANCIAL FEASIBILITY STUDY OF LIQUID FERTILIZER PRODUCING EQUIPMENT RENTAL AT PT XYZ

• Main Author: Hanna Fadhila, Shakira
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/83874
• Institution: Institut Teknologi Bandung

PT XYZ aims to expand its market by offering rental services for liquid fertilizer production equipment in East Java. Using liquid fertilizer produced by PT XYZ's equipment increases crop yields significantly compared to conventional fertilizers. This was proven in a proof of concept conducted in East Java on a 400 m2 plot, where the yield using PT XYZ's liquid fertilizer was 3,100 kg per harvest, compared to only 2,000 kg using conventional fertilizer—an increase of 55%. This study uses both primary and secondary data to determine customers' willingness to pay (WTP) and to forecast cash flow through capital budgeting techniques. The projected rental price of IDR 1,243,279.18 per year per renter aligns with the WTP, targeting a 30% internal rate of return (IRR). Comprehensive risk assessments, including sensitivity analysis and a 1,000-iteration Monte Carlo simulation, support the project's viability. The findings confirm a customer WTP of IDR 68,225,623.81, establishing the rental service's feasibility. The capital budgeting outcome reveals a payback period of 4.55 years and a positive net present value (NPV) of IDR 1,019,247,960. Sensitivity analysis identifies four key NPV drivers: product prices of raw materials for fertilizer production, cost of goods sold (COGS) of raw materials for fertilizer production, rental equipment prices, and the growth rate of raw material prices. The analysis estimates project risk at 10.16% and profitability at 89.84%. The decision to rent out the equipment instead of selling the liquid fertilizer directly is driven by the high distribution costs of shipping liquid products. This approach enhances feasibility and market penetration. Conclusively, the analysis supports the feasibility of PT XYZ’s equipment rental project, indicating robust potential for success in the market.