ENGINEERING ECONOMICS

MID PROJECT
“Engineering Economic Analysis for Empon-Empon Business”

Lecturer : Johan Krisnanto Runtuk, S.T., M.T

Semester : VI
Date : June 20th, 2020
Members : 1. A Izzul Wafi (004201800007)
2. Daniel Adif Nugroho (004201800014)
3. Jessica Ananda Putri (004201800010)
4. Marella Ayu Andani (004201800054)
5. Naufaldi Rafif Kusuma (004201800072)
6. Silka Jefelin Padang Allo (004201800046)

PRESIDENT UNIVERSITY

Jababeka Education Park, Jl. Ki Hajar Dewantara, Kota Jababeka, Cikarang Baru,
Bekasi 17550 – Indonesia
Phone (021) 8910 9762-6, Fax (021) 8910 9768
Email: enrollment@president.ac.id Website: http://www.president.ac.id
 CONTRIBUTION TABLE

Contribution of each member:

No Team Member Student ID Contribution

1. A Izzul Wafi 004201800007 Chapter II, Chapter V

2. Daniel Adif Nugroho 004201800014 Chapter III, Chapter IV, Chapter V

3. Jessica Ananda Putri 004201800010 Chapter III, Chapter IV

4. Marella Ayu Andani 004201800054 Chapter II, Chapter V

5. Naufaldi Rafif Kusuma 004201800072 Chapter I, Chapter IV

6. Silka Jefelin Padang Allo 004201800046 Chapter III, Chapter IV

 TABLE OF CONTENT

CHAPTER I 4
INTRODUCTION 4
1.1 Problem Background 4
1.2 Problem Statement 4
1.3 Objective of Product Business 4
1.4 Vision and Mission 5
1.5 Scope 5
1.6 Assumption 5
CHAPTER II 6
LITERATURE STUDY 6
2.1. Business/Project Information 6
2.2. Feasibility Study 9
2.2.1. The goals of feasibility studies 10
2.2.2. The Importance of Feasibility Studies 10
2.2.3. The stages of Business Feasibility Analysis 10
2.3. Financial Aspect 11
2.3.1. Cash Flow 11
2.3.2. Methodology 12
2.4. Cash Flow 14
2.4.1 Cash Flow Transaction 15
2.4.2 Cash Flow Activation 16
2.4.3 Cash Flow Report Method 17
2.5. Present Worth Analysis 18
CHAPTER III 20
RESEARCH METHODOLOGY 20
3.1. Data Collection 20
3.1.1. Primary Data 20
3.1.2. Secondary Data 21
3.2. Data Analysis 21
3.2.1. Data Calculation 23
3.2.2. Develop Business Alternatives 25
3.3 SWOT Analysis 26
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CHAPTER IV 28
DATA ANALYSIS 28
4.1. Developing Alternatives for Business/Project 28
4.1.1. Building 28
4.1.2. Refrigerator 29
4.2. Cash Flow Projection 30
4.2.1. Balance Sheet on the First Year 30
4.2.2 COGS Statement on the First Year 30
4.2.3 Cash Flow Projection in 10 Years 31
4.3 Analysis 33
4.3.1 Electricity 33
4.3.2 Salary 33
4.3.3 Packaging 33
4.3.4 Building 33
4.3.5 Water 33
4.3.6 Blender 34
4.3.7 Pan 34
4.3.8 Spatula 35
4.3.9 Juicer 35
4.3.10 Stove 36
4.3.11 Bowl 37
4.3.12 Implant Wood 37
4.3.13 Implant Iron 38
4.3.14 Washbowl 38
4.3.15 Digital Scales 39
4.3.16 Scissor 39
4.3.17 Knife 40
4.3.18 Refrigerator 40
4.3.19 Pestle and Mortar 40
4.4 Present Worth 41
4.4.1 Present Worth of Building 41
4.4.2 Present Worth of Refrigerator 42
CHAPTER V 43
CONCLUSION 43

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 5.1 Conclusion 43
5.2 Recommendation 44
BIBLIOGRAPHY 45

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 CHAPTER I

INTRODUCTION

1.1 Problem Background

Corona Pandemic virus (COVID19) has increased awareness of Indonesian society in

particular to maintain hygiene and health of the body. Jamu can be an alternative food or
drink for it has many benefits. The benefits of jamu are to, Increase the Immunity of the
Body, Cleanse Toxins from the Body, Prevent Stroke and Educate the Brain, and others.
Jamu is well known as a traditional drink to maintain the health of the body that has been
consumed by Indonesian society since long ago. We see a trend back drinking jamu as a
promising business opportunity. Moreover, President Joko Widodo also often promotes the
efficacy of jamu that indirectly contributes to raising the popularity of Jamu in Indonesia.
This is reinforced by the statement of experts who say empon-empon as the basic ingredient
of jamu drink can resist the virus Covid-19. Experts estimate after the pandemic crisis. This
ended the trend to drink herbs and new habits in the Society of Indonesia.

By looking at the current situation, the opportunity to open an empon empon business
(jamu) wide open. We try to capture this opportunity by producing medicinal products. We
distribute our interest with modern herbal products with the concept of contemporary coffee,
in addition, to meet the needs of consumers also to attract consumers and strengthen the
position of Jamu become a new lifestyle in the new normal condition

1.2 Problem Statement

a. Does the business make a profit for the owner and all workers?
b. How to apply Present Worth Analysis to business analysis?
c. Is the income increasing every year?

1.3 Objective of Product Business

The objectives of establishing this business are as follows:

1. As a business that is useful and provides income for all of us.

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 2. Become a media for customers on how to increase body immunity properly.
3. Creating job opportunities for people who have experienced dismissal in this pandemic.
4. As a real work or practice in implementing entrepreneurial spirit properly.

1.4 Vision and Mission

a. Vision
Helps improve public health immunity, especially in the current pandemic, with quality
and standards in accordance with applicable regulations.

b. Mission
● Introducting local products to enhance body immunity for people in all circles.
● Changing people's thinking about treatment with local products.
● Applying product results in accordance with applicable sales standards.
● Encourage the whole community to live healthier.

1.5 Scope
In conducting this business, we build the real business on the strategic area, so it will
make our business succeed. To adjust the government regulation in this pandemic, we also
have an online store.

1.6 Assumption
These are the assumption of this business report:
a. This business is profitable for everyone involved in it.
b. This business will continue to grow significantly each year.

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 CHAPTER II

LITERATURE STUDY

2.1. Business/Project Information

Corona Pandemic virus (COVID19) has increased awareness of Indonesian society in
particular to maintain hygiene and health of the body. Jamu can be an alternative food or
drink for it has many benefits. The benefits of jamu are to, Increase the Immunity of the
Body, Cleanse Toxins from the Body, Prevent Stroke and Educate the Brain, and others.
Jamu is well known as a traditional drink to maintain the health of the body that has been
consumed by Indonesian society since long ago. We see a trend back drinking jamu as a
promising business opportunity. Moreover, President Joko Widodo also often promotes the
efficacy of jamu that indirectly contributes to raising the popularity of Jamu in Indonesia.
This is reinforced by the statement of experts who say empon-empon as the basic ingredient
of jamu drink can resist the virus Covid-19. Experts estimate after the crisis pandemic This
ended the trend to drink herbs and new habits in the Society of Indonesia.

By looking at the current situation, the opportunity to open a business empon empon
(jamu) wide open. We try to capture this opportunity by producing medicinal products. We
distribute our interest with modern herbal products with the concept of contemporary coffee,
in addition, to meet the needs of consumers also to attract consumers and strengthen the
position of jamu become a new lifestyle in the new normal condition

2.1.1. Product Description

Product that we offer as mentioned before is empon empon that can be act as
booster for immunity. Besides booster for immunity, our product have other benefits,
such as ; increasing neurotrophic factors in brain, prevent and cure for alzheimer, help
to prevent cancer, and consists natural anti inflammation compound.

Overall, our product is all about health, and to support the community's healthy
lifestyle needs. We also serve a ready to consume product, so that consumers no need

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 to think about hard preparation to consume the empon empon, and can directly
consume straight out of purchase.

2.1.2. Product Ingredients

The ingredients used in making this product are ingredients that come from
nature, so this product has a lot of good nutrition for body health. The materials that
will be used in making this product are such as below:

● Ginger
● Red Ginger
● Turmeric
● White Turmeric
● Curcuma
● Cutcherry
● Ginseng
● Finger roots
● Galangal
● Lemongrass
● Palm Sugar

2.1.3. Product Design

Design is a matter of great concern in the manufacture of this product, because

attractive packaging can attract buyers. In addition, the function of the packaging is
also a matter of concern such as product description, and it is easy to carry anywhere
and can withstand cold and hot temperatures.

Figure 2.1 Examples of packaging models and designs.

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2.1.4 Marketing Strategy

1) Segmentation

a. Demographic Segmentation
This is a way to divide customers according to age, gender, income, ethnic
background, and family life cycle.

b. Geographical Segmentation
This is a way to divide customers according to their region.

c. Psychographic Segmentation
This is a way to divide customers by using their lifestyle and attitudes about the
importance of empon-empon needs as an immune enhancer in the current
pandemic.

2) Targeting

Our marketing target is all people from various backgrounds. However, our
main target is teenagers and adults who are eager to increase their immune system
to avoid COVID-19.

3) Position

● We position our products as high quality brands.

● We position our products in such a way that they can differentiate our products
from competition, which gives them an advantage.

2.1.5. 4P Mix Strategy

1. Product
Product that we offer as mentioned before is empon-empon that can act as a
booster for immunity. Besides booster immunity, our product has other benefits,
such as increasing neurotrophic factors in the brain, preventing and curing

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 Alzheimer's, helps to prevent cancer, and consists of a natural anti-inflammatory
compound. The products we market are different from what herbalists sell in
general.

2. Price
The price that you offer is also very affordable, only Rp 3.000,00 , so that it
can be easily purchased by everyone from various backgrounds. We sell it at an
affordable price, aka cheap because the ingredients we use are very young herbal
ingredients to find.

3. Place

Because when a pandemic like this is not possible to open tenants, we sell
only through online shopping and social media. So, customers can order products
by sending messages to our social media or can also order via online shopping. Then
later we will process the order and we will send it using package sender services
such as JNE, JNT, etc. We guarantee the way we wrap products is a very sterile
way.

4. Promotion
The promotion that we offer is for the first 50 buyers of our products we will
give a bonus in the form of a hand sanitizer and also a mask that might be useful in
a pandemic era like this.

2.2. Feasibility Study

Business Feasibility Analysis or also called feasibility study is an activity to assess the
extent of the benefits that can be obtained in carrying out a business activity. The results of
this analysis are used as consideration in making decisions, whether to accept or reject a
business idea. Understanding feasible in this research is the possibility of the idea of a
business that will be implemented to provide benefits in terms of financial and social benefits.
With this feasibility analysis, it is expected that the risk of failure in marketing products can
be avoided. The feasibility study is an analysis that also takes into account all relevant factors
in a project - including economic, technical, legal, and scheduling considerations - to ensure
the possibility of successful completion of the project. Feasibility studies are used to find out

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the advantages and disadvantages of projects before they invest a lot of time and money into
them. Feasibility studies can also provide important information to company management
that can prevent companies from entering blindly into risky businesses

2.2.1. The goals of feasibility studies

● To thoroughly understand all aspects of the project, concept, or plan.

● To find out the potential problems that can occur when implementing a project.
● To determine whether, after considering all the important factors, the project is
feasible, is that worth to take.
● Know the level of benefits to alternative investments.
● Assess alternative investments.
● Determine investment priorities, so investments can be avoided that only waste
resources.

2.2.2. The Importance of Feasibility Studies

Feasibility studies are important for business development. It is useful to consider

where and how the business will operate. Feasibility studies can also identify potential
constraints that could hinder operations and consider the amount of funds needed to
run a business. The feasibility study aims as a marketing strategy that can help convince
investors or banks that investing in a particular project or business is a wise choice.
When conducting a feasibility study, it should have an emergency plan that has also
been calculated to ensure it is a viable alternative if the first plan fails

2.2.3. The stages of Business Feasibility Analysis

Feasibility study analysis pays attention to several aspects including:

1. Market Aspects
This aspect is the first thing that needs to be studied in discussing feasibility studies
to identify and determine products or services. Aspects of the market discuss market
opportunities, market determination, and steps that need to be done.

2. Technical and Operational Aspects,

These aspects are used for determining the type of technology in the products and
services that are being studied.
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 3. Financial Aspects
This aspect plays an important role in conducting feasibility study analysis. in this
case this aspect examines the income and costs required and will be discussed
further in the next discussion.

4. Environmental Aspects
Environmental Aspects is including the location where the business runs. Whether
it's about physical conditions, biology and social.

5. Legal Aspects
This aspect is including the validity of business perfection and the authenticity of
documents required in conducting business to avoid problems in the future.

2.3. Financial Aspect

Financial aspect plays an important role in conducting feasibility study analysis, this
aspect aims to find out the estimated funding and cash flow of the project / business, so that
it can be known whether or not the business plan is feasible.

The financial aspect is also said to be the basis for whether or not it is implemented as
a desired investment. Therefore in assessing investment must really pay attention to the
available funds whether they can be used on a regular basis maximum in order to achieve the
goals of the company. In this financial aspect to discuss how to estimate the funding
requirements used for fixed assets and for working capital. From a financial or financial
aspect, a project is said to be feasible if it can make a profit and fulfill its financial obligations.

2.3.1. Cash Flow

Cash flow is the flow of funds from a business that consists of business revenue
(inflow) and business expenditure (outflow). Cash flows are arranged to show changes
in cash during a period as well as giving reasons regarding the change in cash with
shows where the cash sources are and their uses. According to the type of cash flow
transactions are divided into two types:

● Cash Inflow

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 Cash Inflow is cash flow according to the type of transaction in the form of cash
receipts. Inflow is there the small industry consists of sales receipts, additional
benefits, and residual value.

● Cash Outflow
Cash Outflow is cash flow according to the type of transaction which resulted in the
expenditure of cash funds. Business outflow can be grouped into three namely
investment costs, fixed costs, and variable cost.

The explanation of cash flow will be discussed more in the next discussion part.

2.3.2. Methodology

The feasibility study from the financial aspect can be investigated from the
assessment of cash flow from an investment. From aspects the financial of an
investment proposal will be assessed whether it will beneficial or not by using
various methods, here methods used in valuing the cash flow of investment:
1. Payback period
2. Net Present Value
3. Internal rate of return
4. Index Probability

a. Payback period (PP)

Payback period is a period that needed to be able to return the investment that has
been issues through profits derived from a project. Furthermore payback period is
the ratio between initial cash investment with cash inflows which the result is a unit
of time. The value of this ratio compared with the maximum payback acceptable
period. Formulation that used to calculate Payback period (PP) is:

𝑵𝒆𝒕 𝒊𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
𝑷𝒂𝒚𝒃𝒂𝒄𝒌 𝑷𝒆𝒓𝒊𝒐𝒅(𝑷𝑷) = 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒂𝒏𝒏𝒖𝒂𝒍 𝒐𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝒄𝒂𝒔𝒉 𝒇𝒍𝒐𝒘

The evaluation criteria are if the project payback period is shorter in time compared
to the maximum payback period, the investment proposal is feasible.

b. Net Present Value (NPV)

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 This method is known as the Present Worth method used to determine whether a
plan has an advantage in the analysis period, i.e. by determining the base year market
value of the project. Net Present Value of a project is the present value between
Benefits compared to costs. The mathematical form of the equation is as the
following:

𝑵𝑷𝑽 = 𝑷𝑽𝑩 − 𝑷𝑽𝑪

Where :
NPV = Net present value
PVB = Present Value of Benefit
PVC = Present Value of the Cost

The Net Present Values method is a method that is done in a way to compare the
present value of net cash inflows (proceeds) with value now the cost of spending an
investment (outlays) .. The formula used to calculate the Net Present Value (NPV)
is as follows:

𝒏
𝑨𝒕
𝑵𝑷𝑽 = ∑ − 𝑰𝑶
( 𝟏 + 𝒊 )𝒕
𝒕=𝟏

Where:
I = Discount rate
𝐴𝑡 = Cash Flow in t period
t = Amount of year
IO = Initial Outlay
n = Last period of cash flow is expected

c. Internal Rate of Return (IRR)

This method is used to calculate the interest rate that can be equated to the present
value of all cash inflows with cash flows out of a project investment. IRR is a
discount rate to make NPV become zero projection, that is mean the expected
compound annual rate of return that will be earned in a project or investment. The
formulation used is follows:

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 𝑪𝑭𝟏 𝑪𝑭𝟐 𝑪𝑭𝒏
𝟎 = 𝑪𝑭𝟎 + + + ⋯ +
(𝟏 + 𝑰𝑹𝑹) (𝟏 + 𝑰𝑹𝑹)𝟐 (𝟏 + 𝑰𝑹𝑹)𝒏

Where:
𝐶𝐹0 = Initial investment/outlay
𝐶𝐹1 , 𝐶𝐹2 , … , 𝐶𝐹0 = Cash flows
n = Each period
N = Holding period

If the IRR is greater or equal than the cost of capital, the company should accept the
investment or the project, and vice versa.

d. Profitability Index

This profitability index (PI) method can be searched by counting a comparison

between present value of net cash receipts in the future will come (proceeds) to the
present value of the investment (outlays). Profitability index is a comparison
between the value of investment cash flow with investment costs incurred. An
investment is said to be feasible if the profitability index value is more than one,
conversely if it is less then the investment rejected. The formula used in the
profitability index method is as following:

𝑷𝑽 𝒐𝒇 𝑭𝒖𝒕𝒖𝒓𝒆 𝑪𝒂𝒔𝒉 𝑭𝒍𝒐𝒘

𝑷𝑰 = 𝑰𝒏𝒊𝒕𝒊𝒂𝒍 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕

The investment eligibility criteria from the financial aspect can be implemented if
the feasibility test payback period value, Net Present Value (NPV), Internal Rate of
Return (IRR), and The Profitability Index (PI) meets the acceptable criteria.

2.4. Cash Flow

Cash flow is the flow of funds from a business that consists of business revenue
(inflow) and business expenditure (outflow) at a certain time period. Financial statements of
cash flows can be used to track income and expenses from all corporate activities. The main
cash is derived from the operating income of the company used to finance new investment
needs such as fixed assets. The value of an asset (or company as a whole) is determined by
the cash flow it generates. Furthermore, the company can also find out if the production made

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by the company will be oriented to make profit or not through cash flow. If the amount of
cash is less, then the operational activities of the company will be interrupted, and when there
is too much cash, causing the company to not utilize the cash to obtain a high yield. Therefore,
the cash in the company must be managed to maintain the liquidity level of the company
because the amount of cash available can affect the liquidity of the company and reflect the
company's ability to fulfill its obligations in a timely manner.

Figure 2.2 Example of cash flow

2.4.1 Cash Flow Transaction

According to the type of cash flow transactions are divided into two types:

● Cash Inflow

Cash inflow is a cash flow that occurs from transaction activities that generate cash
receipts. Incoming cash flows are consist:
▪ Product sales results of the company.
▪ Billing receivables from credit sales.
▪ Sales of existing fixed assets.
▪ Acceptance of investments from owners or shares when the company is limited.
▪ Loans/debts from other parties.
▪ Acceptance of rent and other income.

● Cash Outflow

Cash out flow is a cash flow that occurs from transaction activities that result in the
burden of cash expenditure. Cash out flow are consists with:

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 ▪ Expenditure on raw materials, direct labor and plant costs etc.
▪ Expenditure on general administrative expenses and sales administration.
▪ Purchase of fixed assets.
▪ Payment of corporate debts.
▪ Repayments of investments from the company owners.
▪ Rental payments, taxes, dividends, interest and other expenses.

2.4.2 Cash Flow Activation

The cash flow statement provides relevant information about the cash receipts
and expenditures of the company from a given period, by classifying transactions based
on operations, investment and financing activities.

● Operating Activities

Operating activities are statements of cash flows consisting of operational

activities of the company. Operation activities to gain income and expense from the
company's main operations. Therefore the operation activity affects the income
statement, which is reported on the accrual basis. Whereas the cash flow report
reported its impact on cash. The largest cash inflows from the operas come from the
cash collection of subscriptions. The less important cash inflows are the interest
acceptance on loans and dividends on investment shares. Operating cash outflows
include payments to suppliers and employees, as well as interest and tax payments.

● Investing Activities

Investment activities increase and decrease the long-term assets that the
company uses to perform its activities. The purchase or sale of fixed assets such as
land, building, or equipment is an investment activity, or it can also be the purchase
or sale of investments in stocks or bonds of other companies.

On the cash flow statement the investment activity includes more than just the
buying and selling of assets classified as investments in the balance sheet. Lending
is also an investment activity because the loan creates receivables to borrowers. The
settlement of such loans is also reported as an investment activity on the cash flow
statement.
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 ● Financing Activities

Funding activities include activities to acquire cash from investors and

creditors required to run and resume company activities. Financing activities include
stock expenditures, lending money by issuing pay orders and bond loans, Treasury
shares sales, and payments against shareholders such as dividends and the purchase
of Treasury stocks. Payments against creditors only include the principal payment
of loans.

2.4.3 Cash Flow Report Method

There are two methods to make a statement of cash flows are direct cash flow
and indirect cash flow method.

● Direct Cash Flow

The direct method adds up all the various types of cash payments and receipts,
including cash paid to suppliers, cash receipts from customers and cash paid out in
salaries. These figures are calculated by using the beginning and ending balances of
a variety of business accounts and examining the net decrease or increase of the
account.

● Indirect Cash Flow

In indirect method, cash flow from operating activities is calculated by first taking
the net income from a company's income statement. Because a company’s income
statement is prepared on an accrual basis, revenue is only recognized when it is
earned and not when it is received. Net income is not a perfectly accurate
representation of net cash flow from operating activities; so, it becomes necessary
to adjust earnings before interest and taxes (EBIT) for items that affect net income
even though no actual cash has yet been received or paid against them. The indirect
method also makes adjustments to add back non-operating activities that do not
affect a company's operating cash flow.

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2.5. Present Worth Analysis
The current value is the equivalent method of analysis whereby all incoming cash flows
and outgoing cash flows count towards the present point in time at the minimum attractive
rate of return (MARR). This is probably the most efficient method of analysis we can use to
determine the economic acceptance of the project.

Formula present worth analysis:

NPWC = -FC + RV(P/F,i,n) - EAOC(P/A,i,n) - EAOHC(P/F,i,nx)(P/A,i,n) +

EAOI(P/A,i,n)

Figure 2.3 Notation of formula present worth analysis

Figure 2.4 Present worth criteria

Present worth method is a process of obtaining the equivalent worth of future cash
flows back to some point in time. At an interest rate usually equal to or greater than the
Organization’s established MARR. If the cash flow contains a mixture of positive (cash
inflow) and negative cash flows (cash outflow). So we can calculate PW(+ Cash Flows) at

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i% and PW( - Cash Flows) at i% or we can add the two results since the equivalent cash
flows occur at the same point in time.
● If PW (i %) > 0 then the project is deemed acceptable.
● If PW (i %) < 0 then the project is deemed unacceptable.
● If the net present worth = 0. Then, the project earns exactly i % return and indifferent
unless we choose to accept the project at i %.

Here, a loan transaction starts with a positive cash flow when the loan is received and
continuous with negative cash flows for the payoffs. As we can see in the picture below,
upward arrows means positive cash flow (receiving the loan) and downward arrows means
negative cash flow (pay off).

Figure 2. 5 Cash flow diagram of loan transaction

An investment transaction starts with a negative cash flow when the investment is done
and continuous with positive cash flows when receiving the paybacks. As we can see in the
picture below, upward arrows means positive cash flows (pay back) and downward arrows
means negative cash flow (investing).

Figure 2.6 Cash flow diagram of investment transaction

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 CHAPTER III

RESEARCH METHODOLOGY

As indicated in the title, this chapter covers the research methodology for the "Own Business
Analysis" material which is then implemented in the form of Present Worth Analysis and also Cash
Flows Projection.

3.1. Data Collection

Our data sources that used for this research are from:

3.1.1. Primary Data

As the first method in developing ideas, we conduct focus group discussions

online and discuss what methods will be used in carrying out this business idea. Each
developer or group member submits their respective ideas, and then we put these ideas
together into an idea that contains all the opinions of group members. In this group
discussion, we also discuss strategies such as what we use to be able to balance the
surrounding market and also the marketing strategies that are in force today.

Based on the results of discussions that have been conducted, we opened a

business in a pandemic situation, so we decided to focus more on the online market to
market our products. We use online media such as social media and online shopping
media, and also collaborate with several shipping couriers to facilitate our efforts to be
more advanced.

Primary data that used for this research as following:

a. Credit base interest rate (Suku Bunga Dasar Kredit, SBDK) 2018-2020.
b. Age of the equipment used
Data of age about how long the equipment can be used by customers is important to
help us calculate depreciation cost. To calculate the depreciation, we have to know
about this problem before we get the real data of depreciation of our business.
c. Research Approach

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 The research approach that is followed for the purpose of this study is a direct
approach by doing real business so that we get real data and in accordance with what
we want. The business that we live in is both an online and offline business.

3.1.2. Secondary Data

Secondary data is data that we got from any literatures that can support our
research and analysis, such as:

• Internet
As additional knowledge to expedite the business we run, we also use the internet
as a second way to collect business data. We use the internet about what types of
products are in accordance with current government regulations, then we also use
the internet as a medium to find out what materials are suitable to be added to the
process of making our products.
• Books and journals or articles
Furthermore, we also use articles as our reference in developing business. We find
out what percentage of Indonesian people are interested in local products. It turns
out that people's interest in local products is very minimal, so we use this road to
create modern local products in an advanced era like now.
• Consultation to our advisor
• Discussion with teammates, and other datas that relate to this research

3.2. Data Analysis

Present Worth Analysis is often used to set the current value from the revenue and
expenditure in the future. It helps us, who run the business, for example, to set the present
worth from product production income. If the future income and the costs are known, we can
use the fit interest rate to calculate the product’s present worth. Those things can be used for
estimating which product can be bought or sold. There are three criteria of economic efficient
on the present worth analysis:

1. Fixed input

Condition: Amount of money or input of resources is fixed.

Criteria: To maximize profit of present worth or other output.

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2. Fixed Output

Condition: There is profit or other output that will be reached.

Criteria: To minimize cost of present worth or other input.

3. Fixed Input and Output

Condition: Amount of money, other input, amount of profit, and other output, all of those
are fixed.
Criteria: To maximize net value of the input and output.

The Present Worth Analysis is done by first calculating the Net Present Worth (NPV)
of each one on each alternative. NPV is acquired using the equation:

𝑵𝑷𝑽 = 𝑷𝑾𝑹𝒆𝒗𝒆𝒏𝒖𝒆 – 𝑷𝑾𝑬𝒙𝒑𝒏𝒆𝒔𝒆

For a single alternative, if obtained NPV ≥ 0, then the alternative is acceptable. As

for the situation where there is more than one alternative, the alternative with the
largest NPV is the most interesting alternative to choose. In situations where the
alternative exists is independent, select all alternatives that have a NPV ≥ 0. Net Present
Value denotes the current worth of a future investment.

There are some advantages by using NPV method from PWA:

• This NPV method takes the basic idea that the future dollar is worthless than a today
dollar. The cash flows are discounted by another period of capital cost, in every period. It
also tells whether an investment will create value for the investor or the company, and by
how much in terms of dollar. In addition, NPV allows for consideration of different things
and considers various factors, like the investment opportunity costs, as well as the interest
rates and cost of capital. For long-term ventures this is very beneficial.

• NPV provides a better forecast, it also takes uncertain cash flow and inflation into account.
Meaning that any decision that is going to be made in large-scale depends on the available
data as well as the total time of the project.

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3.2.1. Data Calculation

Below are some calculation we do according to our relevant data:

a. Initial Capital

Initial costs mean costs required to build or renovate facilities. This cost is very
necessary to buy facilities that will be used in the business.

Table 3.1 Initial capital

b. Capital

Below are shown the finances data and costs including investment, production cost,
and total gross profit per year, also Cost of Good Sold (COGS) Statement. These
data were already analyzed by Engineering Economic Analysis, to define the most
beneficial objective to decrease the cost.

23
 Table 3.2 Capital

c. Depreciated Cost

Depreciated cost is the value of a fixed asset minus all of the accumulated
depreciation that has been recorded against it. Depreciated cost helps companies
assess their capital spending habits as well as their accounting methodology. The

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 depreciated cost is also known as the “salvage value”, “net book value”, or “adjusted
cost basis”.

Below is the depreciated cost table:

Table 3.3 Depreciated Cost

3.2.2. Develop Business Alternatives

There are two alternatives to develop our business, which are:

a. Building
b. Equipment

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 These two alternatives are considered by our company, referred from our budget that
have been planned that can also affect the financial aspect in our company. The
complete explanation is on Chapter IV.

3.3 SWOT Analysis

a) Strength

● Healthy product.
● Raw materials are easy to get.
➔ Indonesia is the largest producer of herbs and spices in the world, so it is very
easy to get raw materials in traditional markets or supermarkets.
● Can be consumed by all people.
➔ Because this is a drink that comes from natural ingredients, so it is safe for
consumption by children to parents.
● Packaging that makes it easy to carry
➔ So it can be consumed wherever and whenever.
● Affordable prices.
● Without artificial sweeteners and preservatives.

b) Weakness

● Lack of interest in young people in traditional products.

➔ Promotions are needed through media that are often used by young people, such
as social media (Instagram, Twitter, TikTok, etc.).
● Lack of production worker.
● The method of making which is still traditional.
● The manufacturing process requires quite a long time.

c) Opportunities

● Herbal products (spices) issues are well received by the public because its well
known.
➔ Herbal products (spices) become the choice because of its lower risk levels
compared to chemical products to cure various diseases.

26
 ● Students often use it for studies then develop it into a product.
➔ By taking reference result from the studies, many entrepreneurs make a product
to become their company’s brand then develop it into a quality product.
● People’s lifestyle that uses herbal products as the main choice.
➔ It has become the main choice for people who choose for healthy living. Because
they are also seen that it is have been clinically tested for its quality standards
and efficacy.
● Cooperation in raw materials supply and information exchange between the herbal
producers.
➔ The cooperation happens by the industry players, on the supply of raw materials.
They are exchanging information related to the needs of their raw materials or
new plant species, it is when they are in the same meeting.
d) Threats

● The unstable price of raw materials that can affect the production.
● The condition of weathers also affected the quality of the raw materials.
● Competitors of the same type of products.
● Price War.
➔ Because the customers are interested in cheaper products.
● BPOM requirements are not relevant to the conditions of industry players.
➔ BPOM’s requirements in form of certification standards for buildings and
infrastructure require large costs, making it difficult for companies to meet those
requirements due to capital constraints.
● People’s mindset of westernization.
➔ Because of the import products, it is feared that it can change people's choice by
consuming those products.

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 CHAPTER IV

DATA ANALYSIS

4.1. Developing Alternatives for Business/Project

Referring to the budget that we planned, we encounter some alternatives that need to
be considered from a financial aspect. These alternatives are arranged based on the most
important factors needed by the business.

4.1.1. Building

The first thing on a list is a building, as a place to produce, and sell the product.
The building that we choose with area 117 m2. Our alternatives are to directly buy,
or rent the building, with a 10 years assumption of useful time.

Purchase Building Rent the Building

Initial Cost IDR 1.000.000.000 IDR 54.000.000/year

Annual Maintenance Cost

1. PBB IDR 6.250.000 -

2. Rent Cost - IDR 54.000.000/year

End of Useful Life IDR 1.250.000.000

Useful Line in Years 10 10

Table 4.1 Rent Building

If we purchased the building, the salvage value of the land will increase about
25% in the end of useful life in Cikarang.

𝑺𝒂𝒍𝒗𝒂𝒈𝒆 𝒗𝒂𝒍𝒖𝒆 = 𝟏𝟐𝟓% × 𝟏. 𝟎𝟎𝟎. 𝟎𝟎𝟎. 𝟎𝟎𝟎 = 𝑰𝑫𝑹 𝟏. 𝟐𝟓𝟎. 𝟎𝟎𝟎. 𝟎𝟎𝟎

There is annual cost to pay the tax for the building, for 0.5% from the salvage value

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 𝑷𝑩𝑩 = 𝟎. 𝟓% × 𝟏. 𝟐𝟓𝟎. 𝟎𝟎𝟎. 𝟎𝟎𝟎 = 𝑰𝑫𝑹 𝟔. 𝟐𝟓𝟎. 𝟎𝟎𝟎

If we rent the building for IDR 54.000.000 per year, or IDR 4.500.000 per
month, the company has to pay an annual cost every year, or month depending on the
payment methods, and since the building is not owned by the company, there is no
salvage value.

4.1.2. Refrigerator

Keeping the materials and the finished good fresh is as important as having a
place. Keeping the material in order to ensure the quality of the product itself.
Therefore we have two alternatives that can support the business. In choosing the
refrigerator, authors compare two kinds of refrigerators with different types but
having the same functions.

Modena Chest Freezer LG Inverter GN B 200

Conserva SQBB

Initial Cost IDR 3.115.000 IDR 3.450.000

Salvage Value IDR 1.570.000 IDR 1.700.000

Useful Life 15 years 15 years

Table 4.2 Refrigerator Cost

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4.2. Cash Flow Projection
Below stated the balance sheet and cost of goods sold of the production. The analysis
is based on beneficial alternatives of Engineering Economic analysis. We have decided to
invest in 10 years in this business, the projection of cash flow shown as follows.

4.2.1. Balance Sheet on the First Year

Table 4.3 Balance Sheet

4.2.2 COGS Statement on the First Year

Table 4.4 COGS Statement

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4.2.3 Cash Flow Projection in 10 Years

The cash flow projection for 10 years shown in the following table, the
prediction of growth rate in each year is 5%. The net differences between outflow and
inflow are growing from year 1 to 10.

Table 4.5 Cash flow projection year 1 to 5

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Table 4.6 Cash flow projection year 6 to 10

Table 4.7 Table of different

32
 Graph 4.1 Net Differences

4.3 Analysis
4.3.1 Electricity

The electricity for the company is 530 kWh and the estimation the cost for a
month is IDR 800.000 per month

4.3.2 Salary

There are 2 employees working in the place, each of them will get their salary
IDR 2.000.000 per month.

4.3.3 Packaging

The herbal drink (Jamu) will be packaged with plastic bottles. The cost of plastic
bottle IDR 800.000 per month

4.3.4 Building

The building area is 117 m2. The building was rent for IDR 54.000.000 for 10 years.

4.3.5 Water

The cost of water usage per month is IDR 100.000

33
4.3.6 Blender

The price of 1 Blender full of sets is IDR 500.000 with a useful life of 8 years.
After 8 years of usage, the company decides to buy a new blender because in 8 years
usage, the blender would be damaged because it’s often used.

Figure 4.1 Blender

4.3.7 Pan

For pan we have two kinds of it there are:

a. Big Pan

The price of 1 big pan is IDR 300.000 with a useful life of 10 years.
After 10 years of usage the company decides to buy a new pan because, in 10 years
usage, the pan would be damaged because it’s often used.

Figure 4.2 Big Pan

b. Small Pan

34
 The price of 1 Small pan is IDR 60.000 with a useful life of 10 years.
After 10 years of usage the company decides to buy a new pan because, in 10 years
usage, the pan would be damaged because it’s often used.

Figure 4.3 Small Pan

4.3.8 Spatula

The price of 1 Spatula is IDR 30.000 with a useful life of 7 years.

After 7 years of usage the company decides to buy a new Spatula because, in 7 years
usage, the spatula would be damaged because it’s often used.

Figure 4.4 Spatula

4.3.9 Juicer

The price of 1 Juicer for full sets is IDR 500.000 with the useful life of 8 years.
After 8 years of usage the company decides to buy a new Juicer because, in 8 years
usage, the juicer would be damaged because it’s often used.

35
 Figure 4.5 Juicer

4.3.10 Stove

For stove we have two kinds of it there are:

a. Big Stove

The price of 1 Big Stove is IDR 150.000 with the useful life of 7 years.
After 7 years of usage the company decides to buy a new big stove because, in 7
years usage, the stove would be damaged because it’s often used.

Figure 4.6 Big Stove

b. Small Stove
The price of 1 Small stove is IDR 250.000 with the useful life of 7 years.
After 7 years of usage the company decides to buy a new Small stove because, in
7 years usage, the stove would be damaged because it’s often used.

36
 Figure 4.7 Small Stove

4.3.11 Bowl

The price of 1 Bowl full of sets is IDR 60.000 with a useful life of 10 years.
After 10 years of usage the company decides to buy a new bowl because, in 10 years
usage, the bowl would be damaged because it’s often used.

Figure 4.8 Full set Bowl

4.3.12 Implant Wood

The price of 1 Implant wood is IDR 10.000 with a useful life of 7 years.
After 7 years of usage the company decides to buy a new Implant wood because, in 7
years usage, the implant wood would be damaged because it’s often used.

37
 Figure 4.9 Implant Wood

4.3.13 Implant Iron

The price of 1 Implant iron is IDR 30.000 with a useful life of 10 years.
After 10 years of usage the company decides to buy a new Implant iron because, in
10 years usage, the implant iron would be damaged because it’s often used.

Figure 4.10 Implant Iron

4.3.14 Washbowl

The price of 1 Washbowl is IDR12.000 with a useful life of 10 years.

38
 After 10 years of usage the company decides to buy a new Washbowl because, in 10
years usage, the washbowl would be damaged because it’s often used.

Figure 4.11 Washbowl

4.3.15 Digital Scales

The price of 1 Digital scales is IDR 350.000 with a useful life of 15 years.
After 15 years of usage the company decides to buy a new digital scales because, in
15 years usage, the digital scales would be damaged because it’s often used.

Figure 4.12 Digital Scale

4.3.16 Scissor

The price of 1 scissor is IDR 15.000 with a useful life of 10 years.

39
 After 10 years of usage the company decides to buy a new scissor because, in 10 years
usage, the scissor would be damaged because it’s often used.

Figure 4.13 Scissor

4.3.17 Knife

The price of 1 Knife is IDR 45.000 with a useful life of 10 years.

After 10 years of usage the company decides to buy a new knife because, in 10 years
usage, the knife would be damaged because it’s often used.

Figure 4.14 Knife

4.3.18 Refrigerator

The price of 1 Refrigerator is IDR 3.500.000 with a useful life of 15 years.

After 15 years of usage the company decides to buy a new refrigerator because, in 15
years usage, the refrigerator would be damaged because it’s often used.

4.3.19 Pestle and Mortar

The price of 1 Pestle and Mortar is IDR 20.000 with a useful life of 10 years.
After 10 years of usage the company decides to buy a new pestle and mortar because,
in 10 years usage, the pestle and mortar would be damaged because it’s often used.

40
 Figure 4.15 Pestle and Mortar

4.4 Present Worth

4.4.1 Present Worth of Building

To determine which alternative will be profitable. We use present worth of cost

with fixed input, so that we minimize the present worth of cost of the aspect. Present
worth will be analyzed with the interest rate 9%.

1. Buying the Building

Initial cost = IDR 1.000.000.000

Maintenance = IDR 6.250.000
End of Useful Life = IDR 1.250.000.000

𝑷𝑾 𝒐𝒇 𝒄𝒐𝒔𝒕 = 𝑰𝒏𝒊𝒕𝒊𝒂𝒍 𝒄𝒐𝒔𝒕 + 𝑨𝒏𝒏𝒖𝒂𝒍 𝒕𝒂𝒙(𝑷⁄𝑨 , 𝟗%, 𝟏𝟎) − 𝑺𝒂𝒍𝒗𝒂𝒈𝒆 𝒗𝒂𝒍𝒖𝒆(𝑷⁄𝑭 , 𝟗%, 𝟏𝟎)
= 𝟏. 𝟎𝟎𝟎. 𝟎𝟎𝟎. 𝟎𝟎𝟎𝟎 + 𝟔. 𝟐𝟓𝟎. 𝟎𝟎𝟎(𝟔, 𝟒𝟏𝟖) − 𝟏. 𝟐𝟓𝟎. 𝟎𝟎𝟎. 𝟎𝟎𝟎(𝟎, 𝟒𝟐𝟐𝟒)
= 𝑰𝑫𝑹 𝟓𝟏𝟐. 𝟏𝟏𝟐. 𝟓𝟎𝟎

2. Renting the Building

Initial cost = IDR 54.000.000

Maintenance = IDR 54.000.000
End of Useful Life = 0

𝑷𝑾 𝒐𝒇 𝒄𝒐𝒔𝒕 = 𝑰𝒏𝒊𝒕𝒊𝒂𝒍 𝒄𝒐𝒔𝒕 + 𝑨𝒏𝒏𝒖𝒂𝒍 𝒕𝒂𝒙(𝑷⁄𝑨 , 𝟗%, 𝟏𝟎) − 𝑺𝒂𝒍𝒗𝒂𝒈𝒆 𝒗𝒂𝒍𝒖𝒆(𝑷⁄𝑭 , 𝟗%, 𝟏𝟎)
= 𝟓𝟒. 𝟎𝟎𝟎. 𝟎𝟎𝟎 + 𝟓𝟒. 𝟎𝟎𝟎. 𝟎𝟎𝟎(𝟔. 𝟒𝟏𝟖) − 𝟎(𝟒𝟐𝟐𝟒)
= 𝑰𝑫𝑹 𝟒𝟎𝟎. 𝟓𝟕𝟐. 𝟎𝟎𝟎

41
4.4.2 Present Worth of Refrigerator

For the present worth of refrigerator we assume that 8% interest rate for each item

1. Modena Chest Freezer Conserva

Initial Cost = IDR 3.115.000

Maintenance = IDR 1.300.000
Salvage Value = IDR 1.570.000
Useful Life = 15 years
Estimated at 10-year analysis period =IDR 1.850.000

𝑷𝑾(𝑨𝒍𝒕 𝟏) = −𝟑. 𝟏𝟏𝟓. 𝟎𝟎𝟎 + 𝟏. 𝟖𝟓𝟎. 𝟎𝟎𝟎(𝑷/𝑭, 𝟖%, 𝟏𝟎)

= −𝟑. 𝟏𝟏𝟓. 𝟎𝟎𝟎 + 𝟏. 𝟖𝟓𝟎. 𝟎𝟎𝟎(𝟎. 𝟒𝟔𝟑𝟐)
= −𝑰𝑫𝑹 𝟐. 𝟐𝟓𝟖. 𝟎𝟖𝟎

2. LG Inverter GN B 200 SQBB

Initial Cost = IDR 3.450.000

Maintenance = IDR 1.100.000
Salvage Value = IDR 1.700.000
Useful Life =15 years
Estimated at 10-year analysis period = IDR 2.100.000

𝑷𝑾(𝑨𝒍𝒕 𝟐) = −𝟑. 𝟒𝟓𝟎. 𝟎𝟎𝟎 + 𝟐. 𝟏𝟎𝟎. 𝟎𝟎𝟎(𝑷/𝑭, 𝟖%, 𝟏𝟎)

= −𝟑. 𝟒𝟓𝟎. 𝟎𝟎𝟎 + 𝟐. 𝟏𝟎𝟎. 𝟎𝟎𝟎(𝟎. 𝟒𝟔𝟑𝟐)
= −𝑰𝑫𝑹 𝟐. 𝟒𝟕𝟕. 𝟐𝟖𝟎

Based on the calculation above, to minimize the cost, our company choose Modena
Chest Freezer Conserva.

42
 CHAPTER V
CONCLUSION

5.1 Conclusion
Empon empon that can strengthen immune, and can be worked as antioxidant. This
business sells ready-to-drink empon beverages known as herbal drink (jamu), following some
assumptions that we use to simplify the analysis. Nevertheless we still encounter some
problems that cannot be simplified using certain assumptions,such as place and refrigerator
as the core item for this business, thus we develop some alternatives for those aspects. In the
end, based on the problem statement stated above, we came up with the conclusion that:

1. Analysis of empon-empon beverage business project results feasible to be implemented

with a value of NPV and capital will be returned after market operations begin.

2. Sales of empon empon products have a big effect on return on capital.

3. From the analysis that has been done the profit that will be increasing throughout 10 years,
except from year 9 to 10 the net difference is lower in year 10, due to a lot of equipment
changes based on the useful life of 10 years.

4. Based on the calculations of present worth of building with the interest rate 9%, we get
positive results by buying or renting a building. It means that the project is deemed
acceptable, but the present worth value with interest rate 9% of each alternative is different.
The present worth value of buying a building is 𝐼𝐷𝑅 512.112.500, whereas the present
worth value of renting a building is 𝐼𝐷𝑅 400. 572.000. So now, we know that buying a
building is more profitable than renting a building.

5. Based on the calculations of present worth of refrigerator with the interest rate 8%, we get
negative results by buying a Modena Chest Freezer Conserva or LG Inverter GN B 200
SQBB. It means that the project is deemed unacceptable, but the present worth value with
an interest rate of 8% of each alternative is different. The present worth value of buying a
Modena Chest Freezer Conserva refrigerator is −𝐼𝐷𝑅 2.258.080, whereas the present worth
value of buying a LG Inverter GN B 200 SQBB refrigerator is −𝐼𝐷𝑅 2.477.280. So now,

43
 we know that buying a Modena Chest Freezer Conserva refrigerator is more profitable than
buying a LG Inverter GN B 200 SQBB refrigerator.

5.2 Recommendation
To maintain the business that has been created, it is advisable to further develop broader
ideas in the sale of this modern "Jamu". Because if you keep buying and selling the same
type of herbal medicine, it will cause businesses to fall behind easily with market conditions
that are in this modern era. The suggested idea could be to sell herbal medicine combined
with a variety of flavors that fit on the tongue of the buyers or think of making herbal bottles
of various sizes in order to create varying prices.

Business development by opening branches in several cities in Indonesia is also very

necessary to advance the business of "Jamu". It aims to further introduce modern tangible
local products among all Indonesian people.

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 BIBLIOGRAPHY

Eschenbach, Ted G. Newnan, Donald G. Lavelle, Jerome P-Engineering economic analysis-Oxford

University Press (2012)

45