print

Financing Mix for Crude Palm Oil Factory Capacity Increase; the case of PT. XYZ

---

World palm oil prices fluctuate greatly, influenced by supply and demand factors, and as well by the policies of advanced countries in consuming palm oil industrial products. The production of vegetable oil from 2003 through 2007 is projected to be 95,624,000 tons, where the consumption is 118,061,000 tons, so a shortfall in production of 22,437,000 tons is expected. At present, Indonesia and Malaysia are the principal palm oil producers in the world, with 80% of production. Indonesia has the possibility to develop plantations more easily than Malaysia, because Indonesia has potential planting areas of some 10 million hectares, compared with Malaysia, which only has around 4 million hectares.nPT. XYZ is a domestic investment company established in 1984 operating in CPO and PKO services and is a family company which is managed professionally. Considering company financial performance, which has consistently yielded quite large profits, in 2003 the company planned to develop its business by adding planting areas of 12,846 hectares, therefore increasing production capacity by 45 tons FFB/hour at the same location with a total planned investment of US$ 26,692,027.00. In financing required investments, the Company has limited funds for its investment activities over the short term. Therefore, in financing the Investment mentioned the company is expected to be gathering capital through Loan Funding, but the company currently lacks the right composition for financing this project. The purpose is to amass optimal investment capital financing.nnThe methods used in investment analysis are Discount Cash Flow and Weighted Average Cost of Capital. Discount Cash Flow to analyze financial measurement consist of Net Present Value, Internal Rate of Return, Profitability Index, Payback Period and Net Cash In Flows. Therefore Weighted Average Cost of Capital to analyze the composition of the capital structure needed. The exercise yielded arange of composition of owner's equity being 10% through 100% and loan 10% through 100%, at an interest rate of 7% through 15%., and also at a cost of debt interest of 8% through 19% and a cost of equity from 10.8% to 19,7%.nnAn ideal capital combination will emerge, which achieves results it implemented through the combination of owner's equity of 50% to 100% and of loan capital of 0% through 50%, at an interest rate of 10%, and a Weighted Average Cost of Capital of 10.47% through 10.68%. The investment could thus be categorized as feasible for the company to operate.n

nNotes: CD is not available

---

Availability

M00057

(wh)

Available

Detail Information

Series Title

-

Call Number

57

Publisher

: Swiss German University., 2004

Collation

-

Language

English

ISBN/ISSN

-

Classification

-

Content Type

-

Media Type

-

Carrier Type

-

Edition

-

Subject(s)

MBA

Specific Detail Info

-

Statement of Responsibility

-

Other version/related

File Attachment

Comments

---

You must be logged in to post a comment