Final Exam Name: Reppi, Michelle Gladys

Problem 1
ABC. Farm Co. enter into a bid to a farm project that will supply a chain of hotels and restaurants with farm
products that currently have monthly demand of 20 000 kg vegetables at $2/kg. ABC plans to invest in
developing its farm by adding a new tractor that will increase its farm productions which currently produce
only 8000kg/month with manual labor. The new tractor will add about 8000kg/month in the first year, then
it will produce 20 000kg/month for the next 5 years. The operating expenses is 68% of revenue, excluding
depreciation expenses. Tax rate is 38%.
Instructions: Using capital budgeting analysis determine if the prospect of adding new tractor is feasible
or not.

Solution

Cost $ 100,000 New Tractor 8000

Life 5 years Manual Labor 8000
Taxes rate 38% $ 2
Operating
I 6% Expense 68%
Rate of return 5%

Year 1 2 3 4
Straight Line Method $16,666.67 $16,666.67 $16,666.67 $16,666.67

0 1 2 3
Cost $ (100,000)
Revenue $ 384,000 $ 480,000 $ 480,000
Depreciation $16,666.67 $16,666.67 $16,666.67
Operating Expense $ 261,120 $ 326,400 $ 326,400
Profit before tax $ 106,213.33 $ 136,933.33 $ 136,933.33
Taxes $ 40,361.07 $ 52,034.67 $ 52,034.67
Operating cash flow $ 65,852.27 $ 84,898.67 $ 84,898.67
Net cash flow $ (100,000) $ 65,852.27 $ 84,898.67 $ 84,898.67
$ (34,147.73) $ 50,750.93 $ 135,649.60

Pay back period

IRR 74%
NPV $299,505.98
PI 4 >1
 Problem 2
ABC construction plans to lease and own a tractor under a lea
ants with farm of the lease agreement up to maximum IDR 27.5 Million/ year,
A. Direct Finance Lease from Caterpillar
ently produce •The term of the lease is 4 years. The lease agreement is non-c
first year, then payment of IDR 10million and 3 equal rental payments at the e
ue, excluding •The tractor has a fair value of IDR 100 million an estimated ec
guaranteed residual value of IDR20 million.
or is feasible •The lease agreement sets the annual rental rate to earn a rate
administrative fee 6% of current fair value
B. Borrow IDR100 million from BRI and buy the tractor from C
BRI requires 5 annual lease installment at i= 7.5%, no service ch
administrative fee upon realising the fund. The installment pai

Instructions: 1. Calculate the lease payment for both option &

kg

from revenue
Solution 1

5 6 A. Direct Finance Lease from Caterpillar

$16,666.67 $16,666.67 Cost
Residual Value
Period
4 5 6 i
Down Payment
$ 480,000 $ 480,000 $ 480,000
$16,666.67 $16,666.67 $16,666.67 Step 1 Lease Payment
$ 326,400 $ 326,400 $ 326,400 a. PV Residual Value
$ 136,933.33 $ 136,933.33 $ 136,933.33 b. PVa
$ 52,034.67 $ 52,034.67 $ 52,034.67 c. Annual lease Payment
$ 84,898.67 $ 84,898.67 $ 84,898.67
$ 84,898.67 $ 84,898.67 $ 84,898.67 Step 2 Schedule of Lease Payment
$ 220,548.27 $ 305,446.93 $ 390,345.60 Date
0
1
2
3
4
5

2. Conclusion and Recommendation

Conclusion
Untuk conclusionnya sebaiknya Unklab melakukan Direct Finan
daripada melakukan peminjaman dana dari BRI. Annual lease p

Recommendation
Mimilih options A
Karena annuan lease payment dari Direct Finance Lease from C
BRI walapun di option A ada selling and administrative fee 6% O
rekomendasikan menggunakan OPTION A
 lans to lease and own a tractor under a lease agreement that calls for terms & provisions
ment up to maximum IDR 27.5 Million/ year, and The followings are 2 lease options
ease from Caterpillar
ase is 4 years. The lease agreement is non-cancelable, requiring down
million and 3 equal rental payments at the end of each year.
air value of IDR 100 million an estimated economic life of five years, and a
l value of IDR20 million.
ent sets the annual rental rate to earn a rate of return of 5%/year. Service and
6% of current fair value
million from BRI and buy the tractor from Caterpillar.
al lease installment at i= 7.5%, no service charges and
upon realising the fund. The installment paid at the end of each year

culate the lease payment for both option & complete the schedules for lease payment
2. Prepare a short conclusions and recommendation, which option should ABC Co. choose.

e Lease from Caterpillar

$ 100,000,000.00
$ 20,000,000.00
4
5%
$ 10,000,000.00

$ 16,454,049.50
1.157625 2.7232480293705
$ 27,006,702.92

of Lease Payment
Annual lease payment
$ 10,000,000.00
$ 27,006,702.92
$ 27,006,702.92
$ 27,006,702.92
$ 20,000,000.00
Lease interest Lease Reduction Lease Receivable
$ 100,000,000.00
$ - $ 10,000,000.00 $ 90,000,000.00
$ 4,500,000.00 $ 22,506,702.92 $ 67,493,297.08
$ 3,374,664.85 $ 23,632,038.07 $ 43,861,259.02
$ 2,193,062.95 $ 24,813,639.97 $ 19,047,619.05
$ 952,380.95 $ 19,047,619.05 $ -

d Recommendation

ya sebaiknya Unklab melakukan Direct Finance Lease dari Caterpillar karena masih lebih menguntungkan
n peminjaman dana dari BRI. Annual lease payment dari direct finance lease masih lebih murah.
e payment dari Direct Finance Lease from Caterpillar masih lebih murah di bandingkan dengan meminjam dari
on A ada selling and administrative fee 6% OPTION A masih tetap lebih murah dari OPTION B. Maka di
enggunakan OPTION A
B. Borrow IDR100 million from BRI and buy the tractor from Caterpillar.
Cost $ 100,000,000.00
Period 5
i 7.50%

Step 1 Lease Payment

a. PVa 0.696558632350116 $ 4.0458849
b. Annual lease Payment $ 24,716,471.78

Step 2 Schedule of Lease Payment

Date Annual lease payment Lease interest Lease Reduction
0
1 $ 24,716,471.78 $ 7,500,000.00 $ 17,216,471.78
2 $ 24,716,471.78 $ 6,208,764.62 $ 18,507,707.16
3 $ 24,716,471.78 $ 4,820,686.58 $ 19,895,785.20
4 $ 24,716,471.78 $ 3,328,502.69 $ 21,387,969.09
5 $ 24,716,471.78 $ 1,724,405.01 $ 22,992,066.77
$ 123,582,358.89
 Lease Receivable
$ 100,000,000.00
$ 82,783,528.22
$ 64,275,821.06
$ 44,380,035.86
$ 22,992,066.77
$ -