the role of financial management dr h mustika lukman arief se mba mm n.
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ManajemenKeuanganmeliputisemuaaktivitas yang berhubungandenganusahamendapatkandana yang dibutuhkanperusahaansertamengggunakandan/mengalokasikandanatersebutsecaraefesiendanefektifgunamencapaitujuanperusahaan.

manajemen keuangan digunakan untuk menjawab pertanyaan
  • What long-term investments should the firma engage in?
  • How can the firm raise the money for the required investments?
  • How much short-term cash flow does a company need to pay its bills?
proses manajemen keuangan for profit organization
Prosesmanajemenkeuanganfor-profit organization



Inv. Jangkapanjang

Inv. Jangkapendek




Modal sendiri:

 Labaditahan

 Saham

 Hutangjk. pjg






  • Alternatifinvestasi?
  • Penilaianinvestasi?
  • pemilihaninvestasi?



  • Jumlahkebutuhandana?
  • Sumberdana?
  • Struktur modal?
  • Biaya modal?
the role of the financial manager
The Role of The Financial Manager
  • Capital Budgeting decision
    • decision to in tangible or intangible assets also called the investment decision
  • Financing decision
    • raising money that the firm needs for its investments and operations
  • Capital structure
    • the mix of long term debt and equity financing
untuk kebijakan fungsi tersebut ada 3 keputusan yang perlu diambil
Untukkebijakanfungsitersebut, ada 3 keputusan yang perludiambil
  • Keputusaninvestasi
  • KeputusanPendanaan
  • KebijkanDividen


tujuan perusahaan
Tujuan Perusahaan

Dalampengertianmikroekonomidisebutbahwatujuanperusahaanadalahmemaksimalkankeuntungan. Namunditinjaudarisudutkeuangantujuaninimengabaikanberbagaikerumitan yang adadalampraktekpengambilankeputusansehari-hari


  • Tidakmengaitkanbesarnyakeuntungan yang dihasilkandengawaktuperolehannya
  • Tidakmemperhatikanmasalahwaktudanketidakpastian
  • Mengabikanlamanyawaktupengembalian
  • Mengabaikanbeban modal yang harusdipikulpemegangsaham
tujuan perusahaan1
Tujuan Perusahaan


‘Basic goal: Maximize stockholder value’ indikatornya

- Firm’s value yang maksimal

- Stock price yang maksimal

  • Nilaiperusahaandicerminkanolehhargapasarsaham
  • Mengapahargapasarsahammencerminkannilai


tujuan manajemen keuangan
  • mempelajaridanmemahamibagaimanaupayaperusahaandalammemaksimalkannilaiperusahaannya (Value of the firm) memalui 3 macamkeputusanyaitu: keputusaninvestasi, keputusanpendaaan, kebijakandividen.

Vf= f (I, F, D)

Vf = value of the firm (nilaiperusahaan)

I = Investment Decision

F = Financial Decision

D = Dividen Policy Decision


The Objektive Function

  • Maximime the Value of the firm
  • Basic corporation financial decision
  • 1. How do you allocate resources across competing uses?
  • 2. How do you raise founds to finance the projects?
  • 3. How much do you reinvest back into the business and how much do you return to you stockholders?
  • The corporate financial toolbox
  • Accounting stetement and ratio
  • Present value
  • Risk and return meodels
  • Option pricing models
aksioma aksioma yang diperlukan untuk memahami manajemen keuangan
Aksioma-aksioma yang diperlukanuntukmemahamiManajemenKeuangan
what is a corporation
What is a Corporation?
  • Types of Corporations
    • Public Companies
    • Private Corporations
    • Limited Liability Corporations (LLC)
organizing a business
Organizing a Business
  • Types of Business Organizations
    • Sole Proprietorships
    • Partnerships
    • Corporations
    • Limited Liability Partnerships
  • Why should a company concetrate primarily on wealth maximization instead of profit maximization?
  • What are the three types of financial management decisions? For each type of decision, give an example of the business transaction that would be relevant.
  • Firms often involve themselves in projects that do not result directly in profits: for example, IBM and Mobil Oil frequently support public television broadcast. Do these projects contradict the goal of maximization of shareholder wealth? Why or why not.

In early 2001, Doc and Lyn McGee formed the McGee Company. The company produced a full line of cakes, and its specialties included chess cake, le,on pound cake, and double-iced, double-chocolate cake. The couple formed the company as an outside interest, and both continued to marketing and distribution. With good product qualty and sound marketing plan, the company grew rapidly. In early 2006, the company was featured in a widely distributed entrepreneurial magazine. Later that year, the company was featured in Gourmet Desserts, sales exploded, and the company began receiving orders from all over the world.

Because of the increased sales. Doc left his order job, followed shortly by lyn. The company hired additional workers to meet demand. Unfortunately, the fast growth experienced by the company led to cash flow and capacity problems. The company is currently producing as many cakes a possible with the assets it owns, but demand for its cakes is still growing. Further, the company has been approached by national supermarket chain with an proposal to put four of its cakes in all of the chain’s stores, and a national restaurant chain has contracted the company obout selling McGee cakes in its restaurants. The restaurant would sell the cakes without a brand name.


Doc and Lyn have operated as a sole proprietorship. They have approached you to help manage direct the company’s growth. Specifically, they have asked you to answer the following questions:

  • What are the advantages and disadvantages of changing the company organization from a sole proprietorship to an Limited Liabilities Company (LLC)?
  • What are the advantages and disdvantages of changing the company organization from a sole proprietorship to a corporation?
  • Ulimately, what action would you recommend the company undertake? Why ?
financial statement analysis
Financial Statement Analysis

Financial analysis can be defined as the process of assessing the financial condition of a firm

Basic Fianancial Statements

  • Balanced Sheet
  • The Income Statement
the balance sheet
The Balance Sheet


financial statements that show the value of the firms’s assets and liabilities at a particular point in time (from an accounting perspective)

us corporation balance sheet u s corporation 2004 and 2005 balance sheets s in millions
US Corporation Balance SheetU.S. CORPORATION 2004 and 2005 Balance Sheets (S in Millions)

Assets Liabilities and Owners’ Equity

2004 2005 2004 2005

Current assets current liabilities

Cash $ 104 $ 160 ccounts payable $ 232 $ 266

Accoumts receivable 455 988 notes payable 196 123

Inventory 553 555 total $ 428 $ 389

Total $1.112 $1.403

Fixed assets

Net plant and Long-term debt $ 408 $ 454

Equipment $1,644 $1,709

Owners’ equity

Common stock and

Paid-in surplus 600 640

Retained earnigs 1,320 1,629

Total $1,920 $2,269

Total liabilities and

Total assets $2,756 $3,112 owners’ equty$2,756 $3,112

the income statement
The Income Statement


Financial statement that shows the revenues, expenses, and net income of a firm over a period of time (from an accounting perspektive)


US Corporation Income StatementU.S. CORPORATION 2005 Income Statement (S in Millions)

Net sales $1,509

Cost of goods sold 750

Depreciation 65

Earnings before interest and taxes $ 694

Interest paid 70

Taxable income $ 624

Taxes 212

Net income $ 412

Diviends $ 103

Addition to retained earnings 309

why evaluate financial statements
Why Evaluate Financial Statements?
  • Internal uses

- Performance evaluation-compensation and

comparison between divisions

- Planning for the future-guide in estimating

future cash flows

  • External uses

- Creditors

- Suppliers

- Custolers

- Stockholders

financial ratio
Financial Ratio
  • The principal analytical tool of the financial analyst is the financial ratio
  • Financial ratios help us identify some of the financial strengths and weaknesses of a company
  • The ratios give us a way of making meaningful comparisons of a firm’s financial data at different points in time and with other firms
categori of financial ratios
Categori of Financial Ratios
  • Short-term solvency or liquidity ratios
  • Long-term solvency or financial leverage ratios
  • Asset management or turnever ratios
  • Profitability ratios
  • Market value ratios
liquidity ratios
Liquidity Ratios

Quick ratio = current assets - inventorie s

Current liabilitie s

Current ratio = current assets

current liabilities

Cash ratio = cash + marketable securities

Current liabilities

long term solvency or financial leverage ratios
Long-term solvency or financial leverage ratios

Total debt ratio = total liabilities

total assets

Debt/equity ratio = Total debt


Equity multiplier = Total Assets


Long term debt ratio = long term debt

long term debt+equty

Times interest earned = EBIT

Interest payments

asset management or turnover ratios
Asset management or turnover ratios

Receivable turnover ratio = Sales


Day’s sales in receivable = 365

Receivables turnover

Inventory turnover ratio = cost of goods sold


Day’s sales in inventory = inventory

Cost of goods sold/365

asset management or turnover ratios1
Asset management or turnover ratios

Fixed asset turnover ratio = Sales

Net fixed assets

Total asset turn over= Sales

Total assets

NWC Turnover = Sales/NCW

Net working capital (NCW) = CA - CL

profitability ratios
Profitability ratios

Net profit margin = net income


Return on asset (ROA) = net Income


Return on equity = net income

Total equity

market value ratios
Market value ratios
  • PE Ratio = Price per share/Earnings per share
  • Market-to-book ratio = market value per sgare/book value per share
sample balance sheet
Sample Balance Sheet

Numbers in millions

sample income statement
Sample Income Statement

Numbers in millions, except EPS & DPS

liquidity ratios1
Liquidity Ratios
  • Current Ratio = CA/CL

- 2256/1995= 1.13 times

2. Quick Ratio = (CA-Inventory)/CL

- (2256-604)/1995 = 83 times

3. Cash Ratio = Cash/CL

-696/1995 = 35 times

long term solvency ratios
Long-term Solvency ratios
  • Total Debt Ratio = (TA – TE)/ TA

- (5394 – 2556)/5394=52.61%

  • Debt/Equity = TD/TE

- (5394-2556)/2556= 1.11 times

  • Equity Multiplier = TA/TE = 1+D/E

- 1=1.11= 2.11

  • Long-term debt ratio = LTD/(LTD=TE)

- 843/(843=2556)= 24.80%

  • Times Interest Earned= EBIT/Interest

- 1138/7= 162.57 times

asset management or turnover ratios2
Asset management or turnover ratios

Computing Receivables ratios

  • Receivables Turnover= Sales/Accounts= Receivable

- 5000/956= 5. 23 times

  • Days’ Sales in receivables = 365/ Receivales Turnover

- 365/5.23= 70 days

asset management or turnover ratios3
Asset management or turnover ratios

Computing Inventory ratios

  • Inventory Turnover = Cost of Goods Sold/Inventory

- 2006/301= 6.66 times

  • Days’ Sales in Inventory = 365/Inventory Turnover

- 365/6.66 = 55 days

asset management or turnover ratios4
Asset management or turnover ratios

Computing Inventory ratios

  • Total Asset Turnover= sales/Total Assets

- 5000/5394= 93

- it is not unusual for TAT <1, especially if a firm has a large amount of fixed assets

  • NWC Turnover = Sales/NWC

- 5000/(2256-1995)= 19.16 times

  • Fixed Asset Turnover= Sales/NFA

- 5000/3138= 1.59 times

profitability measures
Profitability Measures
  • Profit Margin= Net Income/Sales

- 689/5000= 13.78%

  • Return on Assets (ROA) = Net Income/Total Assets

- 689/5394 = 12.77%

  • Return on Equity (REO) = Net Income/Total Equty

- 689/2556= 26.96%

computing market value measures
Computing Market Value Measures
  • Market Price = $ 87.65 per share
  • Shares outstanding = 190.9 million
  • PER ratio = Price per share/Earnings per share

- 87.65/3.61 = 24.28 times

  • Market-to-book ratio = market value per share/book value per share

- 87.65/ (2556/190.9) = 6.56 times

using the dupont identity
Using the DuPont Identity


ROE = Net Income/sales x sales/assets x assets/Equity

- Profit margin is a measure of the firm’s operating efficiensy

- how well does it control costs

- total asset turnover is a measure of the firm’s asset use

efficiency-how well does it manage its assets

- Equity multiplier nis a meausre of the firm’s financial


expanded dupont analysis aeropostale data
Expanded Dupont Analysis-Aeropostale data
  • Balance Sheet Data • income Statement Data

- cash= 138,356 - Sales= 734,868

- inventory= 61,807 - COGS+ 505,152

- other CA = 12,284 - SG&A = 141,520

- fixed assets = 94, 601 - interest = (760)

- equity = 185, 640 - taxes = 34, 702

  • Computations • Computations

- TA = 307,048 - NI= 54,254

- TAT = 2. 393 - PM= 7,383%

- EM = 1.654 - ROA= 17.668%

- ROE= 29.223%

aeropostale expanded dupont chart
Aeropostale Expanded DuPont Chart
  • ROE = 29.22%
  • 11,654


  • PM= 7,383%
  • TAT=2,393
  • Sales=734,868
  • TA=307,048
  • Sales=734,868
  • NI=54,254
  • Sales= 680,614
  • TC=734,868
  • Fixed Assets=94601
  • Current Assets= 212,447
  • Inventory= 61,807
  • COGS= 505, 152
  • Cash= 138,356
  • SG&A= 141,520
  • Interest= (760)
  • Other CA=12,284
  • Taxes= 34,702

ROE = net income x sales x assets

sales assets equty

= 54,254 x 734, 868 x 307, 048

734,868 307,048 185, 640

= 07383 x 2.3933 x 1.6540

= 29.2%


As we study the figure, we quickly see that improvement in the ROE can common in one or more of four ways:

    • Increase sales without a disproportionate increase in cost and expenses
    • Reduce COSGS or operating expences
    • Increase the sales relative to the asset base, either by increasing sales or by reducing the amounts invesred in company assets. From our earlier exammination of Harley-Davidson, we learned that the firm had excessive account receivables and fixed assets. Thus management need to reduce these assets to the lowest in the return on which would in turn result in an increase in the return on assets and then the return on equity
    • Increase the use of debt relative to equity, but only to the extent tha it does not unduly jeopardize the firm’s financial position.
limitations of ratio analysis
Limitations of ratio analysis
  • It is sometimes diffcult to identify the industry category to which a firm belongs when the firm enganges in multiple line of business
  • Published industry averages are only approximations and provide the user with general guidelines rather than scientifically determoned averages of the ratios of all or even a representative sample of the firms within an industry
  • Accounting practice differ widely among firms and can lead to differences in computed ratio
  • An industry average may not provide a desirable target ratio or norm
  • Many firm experience seasonality in their operation

Chris was recently hired by S&S Air, Inc., to assist the company with its financial planning and to evaluate the company’s performance. Chris graduated from college five years ago with a finance degree. He has been employed in the finance departement of a fortune 500 company since then.

S&S Air was founded 10 years ago by friends Mark Sexton and Todd Story. The company has manufactured and light airplanes this period, and the company’s products have received high reviews for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and fly their own airplanes. The company has two models; the birdie, which sells for $53,000, and the Eagle, which sells for $78,000.0


Although the company manufactures aircraft, its operations are different from commercial aircraft companies S&S Air builds aircraft to oredr. By using prefabricated parts, the company can complete the manufacture of an airplane in only five weeks. The company also receives a deposit on each order, as well as another partial payment before the order is complete. In contras, a commersial air plane may take one and one-half to two years to manufacture once the order is placed

Mark and Todd have provide the following financial statements. Chris has gathered the industry ratios for the light airplane manufacturing industry.

  • Using the financial statements provided for S&S Air, calculate each of the ratios listed in the table for the light aircraft industry.
  • Compare the performance of S&S Air to the industry, for each ratio, comment on why it might be viewed as positive or negative relative to the industry. How do you think S&S Air’s ratio would compare to industry average?
time value of money1
  • Future Value-Taking an amout and finding its value at sometime in the future
  • Present Value-Taking an anmout from sometime in the future and finding its value today.
future values
Future Values

Future Value – Amount to which an invenstement will grow after earning interest

Compound Interest – Interest earned on interest.

Simple Interest – Intrest earned only on the original investment.

future values1
Future Values

Example – Simple Interest

Interest earned at a rate of 6% for five years on a principal balance of $100

Today Future Years


Interest earned

Value 100 6 6 6 6 6

106 112 118 124 130

Value at the end of year 5 =$130

future values2
Future Values

Example – Compound Interest

Interest earned at a rate of 6% for five years on the previous year’s balance

Today Future Years


Interest earned

Value 100 6 6.36 6.74 7.15 7.57

106 112.36 119.10 126.25 133.82

Value at the end of year 5 =$133.82

future values3
Future Values


  • What is the future value of$100 if interest is compounded annually at a rate 6% for five years?

FV = $100 x (1+.06)5 = $133.82

2. What is the future value of $100 invested for five years at a nominal interest rate 12%, compounded continuosly?

FV = $100x(1+r)t

compounding periods
Compounding Periods

Compounding an investment m times a years for T years provides for future value of wealth:

FV = Co

for example, if you $50 for years at 12% compounded semi-annually, your investment will grow to

FV = 6 =$70.93

effective interest rates
Effective Interest Rates

reff= (1+r/m)m- 1

Reff= (1+0,12/2)2- 1 = 12,36%

Continuous Compounding :

reff = e m- 1

Reff = (2,71828)0,12- 1 = 12,75%

Dampakdariperiodepemajemukan yang berbedaatasnilaimasadepan $1.000, diinvestasikandengantingkatbunga nominal 8%
how long is the wait
How Long is the wait?

If we deposit $5,000 today in an account paying 10% how long does it take to grow to $10,000?

FV = Co x (1+r)T$10,000=$5,000x(1.10)T

(1.10)T = $10,000 = 2


ln(1.10)T = ln 2

T =ln 2= 0.6931 = 7,27 years

ln (1.10) 0.0953

what rate is enough
What Rate Is Enough?

Assume the total cost of a college education will be $50,000 when your child enters college in 12 years. You have $50,000 to invest today. What rate of interest must you earn on your investment to cover the cost of your child’s education ? About 21.15%

FV = Co x (1+r)T $50,000=$5,000 x (1.r)12

(1.r)12 =$50,000=10 (1+r)101/12


r =101/12 = 1 = 1.2115 = 1 = 2115


What is the future value three years hence of $1.000 invested in an account with a stated annual interest rate of 8%

  • Compounded annually
  • Compounded semiannually
  • Compounded monthly
  • Why does the future value increase as the Compounding period shortens
present values
Present Values

Present Value

Value today of a future cash flow.

Discount factor

Present value of a $1 future payment.

Discount Rate

Interest rate used to compute prent values of future cash flows.

times value of money applications
Times Value of Money(applications)
  • The PV formula has many application, you can solve for the remaining variable.

PV = FV x 1


What is the present value of $ 100 to be received in 3 years if the appropriate interest rate 1s 10%, 15%, and 20%

PV = $100 x 1/(1,1)3 = $75,13

PV = $100 x 1/(1,15)3 = $65,75

PV = $100 x 1/(1,20)3 = $57,87

pv of multiple cash flows
PV of Multiple cash Flows


your auto dealer gives you the choice to pay $15,500 cash now, or make three payments: $8,000 now and $4,000 at the end of the flowwing two years. If your cost of money is 8% wich do you prefer?

Immediate payment 8,000.00

PV 1 = 4,000 = 3,703.70


PV 2= 4,000 = 3,429.36


Total PV = $15,133.06



you are selling your house. The Smith have offered you $115.000. they will pay you immediately. The Joneses have offered you $150.000, but the cannot pay you until theree years from today. The interest rate is 10 percent. Which offer should you choose?

you have the opportunity to make invesment that cost $900.000. if you make the investment now, you will receive $120.000 and three years from today, respectively. The appropriate discount rate for this invesment is 12%. Should you make invesment?

You are given three invesment alternatives to anlyze. The cach flows from these three invesments are follows:
perpetuities annuities
Perpetuities & Annuities

Annuity = Equally spaced level stream of cash flows for a limited period of time.

Perpetuity = A stream of level cash payments that never ends.


FV of Annuity Formula

C = cash payment

r = interest rate

t = Number of years cash payment is received

FVAN = C X (1 + r)t - 1



Example – future Value of annual payments

You plan to save $4,000 every year for 20 years and then retire. Given a 10% rate of interest, what will be the FV of your retirement account?

FVAN = 4.000 x (1 + 0,10)20 - 1


FVAN = $229,100

annuities pv of annuity formula
AnnuitiesPV of Annuity Formula

C = cash payment

r = interest rate

t = Number of years cash payment is received

PVAN = C x (1 – 1/(1+r)t



Example – Annuities

you are purchasing a car. Your are scheduled to make 3 annual instllments of $4,000 per year. Given a rate of interest of 10%, what is the price you are paying for the car (i.e. what is the PV)

PVAN = 4.00 x 1- 1/(1+0,1)3


PVAN = $9.947,41

annuity example
Annuity: Example

Your insurance agent offers to sell you an annuity. It will pay you $400 per for five years. Your requred rate of return is 7%. How much will you be willing to pay?

0 1 2 3 4 5 6

….. ……… …..…. ...……. ……… ...…

400 400 400 400 400

PV = = $1,640.08

annuity example1
Annuity: Example

Your insurance agent offers to sell you an annuity. It will pay you $400 per for five years beginning of each years. Your requred rate of return is 7%. How much will you be willing to pay?

0 1 2 3 4 5 6

…... ……….. ….……. ….……. ...…….. ……

400 400 400 400 400

PAVN = C x (1 – 1/(1+r)tx (1 + r)


PV = = = $1,724.85


Your company is considering leasing $120.000 piece of equipment for the next 10 years. The annual lease payments of $15.000 are due beginning of each year. The buy the equipment for $25.000 at the end of the leasing period. Should your company accept the lease offer if appropriate discount rate is 8 percent a year?


PV of Perpetuity Formula

c = cash payment

r = interest rate

PV = c r

perpetuities annuities1
Perpetuities & Annuities

Example – Annuities

in order to create an endowment, which pays $100,000 per year, forever, how much money must be set aside today in the rate of interest is 10% ?

PV = 100,000= $1,000,000


The market interest rate is 15 percent. What is the price of a consol bond that pays $120 annually ?

perpetuities annuities2
Perpetuities & Annuities

Example –continued

if the first perpetuity payment will not be received until three years from today, how much money needs to be set aside today?

PV = 1,000,000 = $751,315



Inflation – Rate at which prices as a whole are increasing.

Nominal Interest Rate – Rate at which money inveted grows.

Real Interest Rate – Rate at which the purchasing power of an investment increases.


1 + real interest rate = 1+nominal interest rate

1+inflation rate

Approximation formula

Real int. rate = nominal int. rate – inflation rate

questions and problem
Questions and Problem
  • Ellen, a sophmore mechanical engineering student, receives a call from an insurance agent, who believes that Ellen is an older woman ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her an annual fixed income. The annuities are as fllows:

If Ellen could earn 12 percent on her money by placing it in savings account, should she place it instead in any of the annuities? Which ones, if any? Why ?

questions and problem1
Questions and Problem

2. You are triying to plan for retirement in 10 years and currently you have $150,000 in savings account and $250,000 in stock. In addition, you plan to add to your savings by depositing $8,000 per year in your saving account at the end of each of the next five years and then $10,000 per year at the end of each year for the final five years until retirement.

  • Assumsing your savings account returns 8 percent compounded annually and your investment in stocks will return 12 percent compounded annually, how much will you have at the end of 10 years? (ignore taxes)
  • if you expect to live 20 years after you retire, and at a retirement you deposit all of your savings in a bank account paying 11 percent, how much can you withdraw each year after retirement (20 equal withdrawls beginning one year after you retire) to end up with zero-balance at death?



what is capital budgeting
What Is Capital Budgeting
  • Capital budgeting involves the decision making process with respect to investment in fixed assets; specifically, it involves measuring the incremental cash flows associated with investment proposals and evaluating the attractiveness of these cash flows relative to the project’s costs
  • Capital budgeting is decision process that managers use to identify those projects that add to the firm’s value, and as such it is perhaps the most important task faced by financial managers and their staffs.

First, a firm’s capital budgeting decisions define its strategic direction, because moves into new products, services, or markets must be preceded by capital expenditures.

  • Second, the results of capital budgeting decisions continue for many years
  • Thied, poor capital budgeting can have serious finacial consequences.
projects classifications
Projects Classifications
  • Replacement – Worn out equipment
  • Replacement – Reduce costs
  • Expansian of existing produkcts or markets
  • Expansion into new products or markets
  • Safety/environmental projects
  • Recearch and Developments
  • Other
jenis jenis proyek
  • Independent Projects: if the cash flows of one are unaffected by the acceptance of the other. Acceptance or rejection of project depends upon merits of project compared to decision criteria.
  • Mutualli Exclusive Prjocts: if the cash flows of one can be adversely impacted by the acceptance of the other.

The acceptance of one project excludes the possibility of accepting the other(s)

an example of mutally exclusive projects
An Example of Mutally Exclusive Projects


to get products across a river

some alternative invesment rules
Some Alternative InvesmentRules
  • Payback Period
  • Discounted Payback
  • Net Present Value (NPV)
  • Profitability Index
  • Internal Rate of Return
  • Modified internal rate of Return (MIRR)
payback period
Payback Period
  • How long does it take to get the initial cost back in a nominal sense?
  • Computation
    • Estimate the cash flows
    • Subtract the future cash flows from the initial cost until the initial investment has been recovered
  • Decision Rule - Accept if the payback period is less than some preset limit
net cash flows for projects s and l
Net Cash Flows for Projects S and L

Project S : 0 1 2 3 4

-1,000 500 400 300 100

Project L : 0 1 2 3 4

-1,000 100 300 400 600

Payback S = 2 + $100/$300= 2.33 years

Payback L= 3 + $200/$600 = 3.33 years

discounted payback period
Discounted Payback Period
  • Compute the present value of each cash flow and then determinane how long it takes to Payback on a discounted basis
  • Compare to a specified required period
  • Decision Rule – Accept the project if it pays back on a discounted basis within the specified time
projects s and l discounted payback period
Projects S and L: Discounted Payback Period

Project S : 0 1 2 3 4

-1,000 500 400 300 100

Disc. NCF (at 10%) -1,000 455 331 225 68

Project L : 0 1 2 3 4

-1,000 100 300 400 600

Disc. NCF (at 10%) -1,000 91 248 301 410

Payback S = 2 + $100/$300= 2.33 years

Payback L= 3 + $200/$400 = 3.33 years

net present value
Net Present Value

NPV= -Co + C + C +….+ C = -Co + C

(1+r) (1+r)2 (1+r)N(1+r)T

Net Present Value – Present value of cash

flows minus initial invesments

Opportunity Cost of Capital – Expected rate

of return given up by investing in a project

the net present value method
The Net Present Value Method :

Minimum Acceptance Criteria: Accept if NPV > O

Ranking Criteria: Choose the highest NPV

Equal to or greater than zero

Accept the inevestment

Net Present Value

Less than zero

Reject the investment

net present value npv
Net Present Value (NPV)

NPV = -1,000 + 500 400 300 100

(1+0,10)1 (1+0,10)2 (1+0,10)3 (1+0,10)4 =78.82

Cash Flows 0 1 2 3 4

-1000 500 400 300 100





Net Present Value 78.82

npv decision rule
NPV – Decision Rule
  • A positive NPV means that the project is expected to add value to the firm and will therefore increase the wealth of the owners.
  • Since our goal is to increase owner wealth, NPV is a direct measure of how well this project will meet our goal.
goo attributes of the npv rule
Goo Attributes of the NPV Rule
  • Uses csh flows
  • Uses ALL cash flows of the project
  • Discounts ALL cash flows properly
  • Reinvestment assumption: the NPV rule assumes that all cash flows can be reinvested at the discount rate.
profitability index pi
Profitability Index (PI)

PI = Total PV of Future Cash Flows

Initial Investment

  • Pls = $1,078.82/$1,000=1.079
  • Minimum Acceptance Criteria:
    • Accept if PI > 1
  • Ranking Criteria:
    • select alternative with highest PI
profitability index pi1
Profitability Index (PI)
  • Disadvantages
    • problem with mutually exclusive invesments
  • Advantages:
    • maybe usesful when available invesment funds are limited
    • Easy to undersantand and communicate
    • Correct decision when evaluating independent projects
internal rate of return irr
Internal Rate of Return (IRR)
  • Definition : IRR is the return that makes the NPV= 0
  • Decision Rule: Accept the project if the IRR is greater than the required return

CFo+ CF1 + CF2 +……+ CFn= 0

(1+IRR) (1+0,10)2 (1+IRR)n

  • 1,000 + 500 + 400 + 300 + 100 + = 0

(1+r) (1+r)2 (1+r)3 (1+r)4

IRRs = 14.5%


CFo+ CF1 + CF2 +……+ CFn= 0

(1+IRR) (1+0,10)2 (1+IRR)n

  • 1,000 + 100 + 300 + 400 + 600 + = 0

(1+r) (1+r)2 (1+r)3 (1+r)4

IRRL = 14.8%

npv vs irr
  • NPV and IRR will generally give us the same decision
  • Exceptions
    • non-conventional cash flows – cash flow signs change more than once
    • Mutually exclusive projects
      • initial invesments are substantially different
      • Timing of cash flows is substantially different
example non conventional cash flows
Example - Non – conventional Cash flows
  • Suppoese an investment will cost $90,000 initially and will generate the following cash flows:
    • Year 1: 132,000
    • Year 2: 100,000
    • Year 3:-150,000
  • The required return is 15%
  • Should we accept or reject the project?
irr and mutually exclusive projects
IRR and Mutually Exclusive Projects
  • Mutually exclusive projects
    • If you choose one, you can’t choose the other
    • Example: you can choose to attend graduate scholl at either Havard or Standard, but not both
  • Intuitively you would use the following decision rules:
      • NPV – choose the project with the higher NPV
      • IRR - choose the project with the higher IRR
example with mutually exclusive projects
Example With Mutually Exclusive Projects

The required return

for both projects is 10%

Which project should

you accept and why?

conflicts between npv and irr
Conflicts Between NPV and IRR
  • NPV directly measures the increase in value to the firm
  • Whenever there is a conflict between NPV and another decision rule, you should always use NPV
    • IRR is unrealiable in the following situations
    • non-conventaional cash flows
    • Mutually exclusive projects
managers like rates prefer irr to npv comparisons can we give them
Managers like rates—prefer IRR to NPV comparisons. Can we give them
  • Yes, MIRR is the discount rate that causes the PV of a projec’ts terminal value (TV) to equal the PV of cost. TV is found by compounding inflows at WACC
  • Thus, MIRR assumes cash inflow are reinvested at WACC.

PV of costs= terminal Value

(1 + MIRR)

your division is considering two invesment projects
Your division is considering two invesment projects:
  • Compute the payback, discounted payback, NPV, PI, IRR, and MIRR for the following two projects. Assume the required return is 10%
  • If two project mutually exclusive and COC 5%, which project should the firm undertake?
  • If two project muallyeclusive and COC 15%, which project should the firm undertake?
  • What is the crossover rate?
  • Your first assigment in your new position as assistant financial analyst at Caledonia Products is to evaluate two new capital-budgeting proposals. Because this is your first assigment, you have been asked not only to provide a recommendation, but also to respond to a number budgeting process. This is a standard procedure for all new financial analysts at Caledonia and will serve to determine whether you are moved directly into the capital-budgeting analysis departement or are provided with remedial training. The memorandum you received outlining your assgment follows:

to : The New Financial Analyst

from : Mr. V. Morrison, CEO, Caledonia Products

RE : capital-budgeting analysis

provide an evaluation of two proposed projects, both with five-year expected lives and identical initial outlays of $110,000. Both of these projects involeve addition to Caledonia’s highly successful Avalon product line, and as a result, the required rate of return on both projects has been established at 12 percent. The expected free cash flows from each project are as follows:


In evaluating these projects, please respond to the following quetsions:

  • Why is the capital-budgeting process so important?
  • Dtermine the payback, discounted payback, NPV, PI, IRR and MIRR, should they be accepted?
  • What would happen to the NPV and PI, if the required rate of return increased? If the required rate of return decreased?
  • How does a change in the required rate of return affect the project’s IRR?
the dilemma at day pro
The Dilemma at Day-Pro
  • the Day-Pro Chemical Corporation, established I 1995, has managed to earn a consistently high rate of return on its investments. The scret of its success has been strategic and timely development, manufacturing, and marketing of innovative chemical product that have been used in various industries. Currently, the management of the company is considering the manufacture of a thermosetting resin as packaging material for electronical products. The company’s recearch an development teams have come up produce initially but would have greater economies of scale. At the initial presentation, the project leaders of both teams presented their cash flow projections and provided sufficient documentation in support of their proposals. However. Since the products are mutually exclusive, the firm can only fund one proposal.

In order to resolve this dilemma, Tim Palmer, the Assistant Treasurer, and a recent MBA from a prestigious mid-western university, has been assigned the task of analyzing the costs and benefits of the two proposals and presenting his findings to the board of directors. Tim knows that this will be an uphill task, since comes to financial concepts. The Boar has historically had a strong preference for using rates of return as its decision criteria. On occasion it has also used the payback period approach to decide between competing projects. However, Tim is convinced that when net present value (NPV) method is least flawed and when used correctly will always add the most value to a company’s wealth.


After obtaining the cash flow projections for each project (see Tables 1 & 2), and crunching out the numbers, Tim realizes that the hill is going to be steeper than he thought. The various capital budgeting techniques, when applied to the two series of cash flows, provide inconsistent results. The project with the higher NPV has a longer payback period, as a lower Accounting rate of Return (ARR) and Internal Rate of return (IRR). Tim scratches his head, wondering how can convince the Board that the IRR, ARR, and payback often lead to incorrect decisions.


The day-Pro Chemical Corporation, established I 1995, has managed to earn a consistently high rate of return on its invesments. The scret of its success has been strategic aand timely development, manufacturing, and marketing of innovative chemical products that have been used in various industries. Currently, the management of the company is considering the manufacture of a thermosetting resin as packaging material for electronic products. The company’s Recearch and Development teams have come up presentations and provided sufficient documentation in support of their proposals. However, since the products are mutually exclusive, the firm can only fund one proposal.

in order to resolve this dilemma, Tim Palmer, the Assistant Treasurer, and a recent MBA from a presentigious mi-western university, has been assigned task of analyzing the costs and benefits of the two proposals be an uphill task, since the board members are not all on the same page when comes to financial concepts.


The Board has historically had a strong preference for using rates of return as its decision creteria. On occasion it has also used the payback period approach to decide between competing projects. Howerer, Tim is convinced that the net present value (NPV) method is least flawed and when used correctly will always add the most value to a company’s wealth.

after obtaining the cash flow projections for each project (see Table 1&2) and crunching out the numbers, Tim realizezs that the hill is going to be steeper to the two series of cash flows, provide inconsistent results. The project with the higher NPV has a longer payback period, as well as a lower Accounting Rate of Return (ARR) and Internal Rate of Return (IRR). Tim scratches his head, wondering how he can convince the Board that the IRR, ARR, and payback Period can lead to incrorrect decision.

  • Calculate the payback period of each project. Expalin what argument Tim should make to shaow the payback period is not appropriate is this case.
  • Calculate the Discounted Payback Period (DPP)using 10% as the discount rate. Should the tim ask the board to use DPP as the deciding factor? Explain.
  • Calculate the two project’ IRR. How should Tim convince the Board that the NPV method is the way to go?
  • Explain how Tim can show that the Modified Internal Rate of Return (MIRR) is the more realistic measure to use in the case of mutually exclusive projects
  • Calculate the Profitability for each proposal. Can this measure help to solve the dilemma? Explain.



proses penganggaran modal
  • Tentukanbiayaproyek
  • Perkirakanaliranbkas yang diharapkandariproyek, termasuknilaiakhiraktiva
  • Risikodarilairankasproyekharusdietimasi. (memakaidistribusiprobabilitasalirankas)
  • Denganmengetahuirisikodariproyek, manajemenharusmenentukanbiaya modal (cost of capital) yang tepatuntukmendiskonalirankasproyek
  • Tentukannilaisekarangalirankasmasuk yang diharapkandigunakanuntukmemperkirakannilaiaktiva.
  • Terakhir, nilaisekarangdarilairankas yang diharapkandibandingkandenganbiayanya.
hal penting dalam estimasi aliran kas
  • Keputusandalam capital budgeting harusdidasarkanpadaalirankassetelahpajak.
  • Hanyamemeperhatikanincremental cash flow yang relevan.
  • Memperhatikanalirankas yang timbulkarenakeptusaninvestasi, alirankasdarikeputusanpendanaantidakperludiperhatikan (ex: bunga, cicilan, deviden)
  • Tidakmemasukan sunk cost (biaya yang telahterjadi)
  • Opportunity cost harusdiperhitungkansecaratepatdalamanalispenganggaran modal.
project cash flows
Project Cash Flows
  • Initial outlay. This include the cost of the fixed assets associated with the project plus any initial invesment in net operating working capital, such as raw materials
  • Opertaing cash flow. The operating cash flow is the net operating profit after taxes plus depreciation
  • Terminal cash flow. At the end of the project’s life. Usually generated from: salvage value of the fixed assets, adjusted for taxes if the assets are not sold at their book value, return of net operating working capital
project cash flows1
Project Cash Flows

When deciding whether or not to make an invesment, we must first estimate the cash flows that the invesment will provide

  • Generally, these cash flows can be categorized as follows:
    • the initial outlay (IO)
    • operating cash Flows
    • The terminal cash flows (TCF)


Cash flow

Initial terminal

Outlay cash flow

0 1 2 3 4 5 6


Sebagaimanejerkeuangan yang baruditunjukdi Blooper Industries, Andaakanmenganalisissebuah proposal penambangandanpenjualanbijimagnisiumkelassatu yang langka. Proyekinimemerlukaninvestasi$10 juta. Setelah 5 tahunkandunganbiji magnesium habis, metodepenyusutanadalahgarislurus, dengannilaibukupadakahirtahunmenjadi nol. Padatahunkeenamperalatanmungkindapatdijualsenilai $2 juta. Untukituperusahaandikenaltagihanpajakpadatahunkeenamsenilai 35%+ x $2= $0.70. sehinggaaruskasbersihdaripenjualanaktivatahunkeenamadalah $2- $0.7= $1.3 juta. Ramalan modal kerjadari Blooper Industries adalahsbb:

Perusahaan memperkirakanmampumenjual 750.000 pon magnesium per tahundenganharga $20, hargaakanmeningkatsesuaidengantingklatinflasi, bebanoperasidiperkirakansebesar 2/3 daripendapatan. Tingkat inflasi 5%, daritarifpajak 35%. TentukanCash Flows

analisis arus kas proyek penggantian

PT Tekstilmembelimesinpintal 10 tahun yang laludengan$75.000. mesintersebutmemilikiusiaekonomisselama 15 tahundansisusutkandenganmetodegarislurus, tanpanilaisisa. Jadinilaibukumesinsaariniadalah $25.000. perusahaanmerencangkanakanmenggantimesin lama denganmesinbaru. Mesinbaru yang sejenisdapatdibelidenganharga $120.000, denganusiaekonomis 5 tahun, disusutkandengan MACRS. Nilaisisajikadijualrugi $15.000. pajakperusahaan 40%. Apabilapenggantianitudilakukandapatmenghematbiayasebesar $50.000 per tahun. Buatlahestimasi cash flow selama 5 tahun. Apakahproyeklayakdijalankan, bilabiayadana 20%


Scoty Corporation pembuatkomponenelektronik. Scotymempertimbangkanuntukmenggantisatumesinperakit yang dioperasikandengantangandenganmesinbarunyangotomatis. Mesinperakittersebutdibeli 5 thaun yang laludenganharga $50,000, umurekonomis 10 tahun. Hargamesinbaru $60,000, usiaekonomis 5 tahun, tanpanilaisisa

Buatlahestimasi cash flows, apakahproyeklayakdijlankanbilabiayadana 16%

  • PT. A sedangmempertimbangkanpembelianpangganganbaru yang hematenergi. Pangganganiniberharga$40,000 danakandisusutkanmenurutskedul MACRS 3 tahun. Pangganganiniakanndijualsebagaibesituasetelah 3 tahunsenilai $10,000. pangganganinitidakberdampakpadapenerimaantapiakanmenghematbiayaenergisebesar $20,000. tingkatpajak 35%, danbiaya modal 12%.
  • Apakahpangganganiniseharusnyadibeli?
the unequal lives problem
The Unequal Lives Problem
  • There are two ways to correctly deal with the unequal lives problem
    • The replacement chain approach
    • The equivalent annual annuity approach
  • MisalkanAndaharusmemilihdiantara 2 mesin, yang umurnyaberbeda, tapimemilikikapasitasiidentikdanmelakukanpekerjaan yang persissama.

Mesinmana yang sebaiknyadipilih ?

memilih di antara 2 proyek yang mutually exclusive
Memilihdiantara 2 proyek yang mutually exclusive

Jika discount rate = 10%

NPV proyek A = $928,11

NPV proyek B = $612,32

EAA untukproyek A = $213,11

EAA untukproyek B = $246,21

0 1 2 3 4 5 6

NPV B1 =612,32 NPV B2=612,32

PV =460.03


metode penyusutan
  • Metodegarislurus: metodepenyusutan yang mengalokasikanbiayasecaramerataselamausiapenyusutanaktiva
  • Sum of year’s digit method: metodepenyusutandenganpenjumlahanangkatahunan
  • Double decline balance method: denganformulasi 2(1/n) NBV
  • MACRS : denganmenggunakantabeltarif MACRS berikut:
capital rationing limit set on the amount of funds available for investment
Capital Rationing(limit set on the amount of funds available for investment)
  • Firms should implement all positive NPV projects
    • this will maximize shareholder wealth
  • Firms often limi the projects that are considerations
  • Capital Rationing: process of limiting availability of capital dollars
capital rationing
Capital Rationing

Anggaplahbiaya modal 10%, danperusahaanmemilikisumberdaya total $20 juta, saatiniperusahaandihadapkanpadabeberapa proposal proyeksbb:

Karenadanaterbatas $20 juta, makaProyek yang dipilih: L,J,M, dan N

Jikadanaterbatas 10 juta, proyekmana yang dipilih?

capital rationing1
Capital Rationing

Hat company is considering seven capital investment propoasl, for which the funds available are limited to a maximum of $12 million. The projects are independent and have the following cost and profitability index associated with them:

Under strict capital rationing, which projects should be selected ?

study problems
Study Problems

Jack tar, CFO sheetbend Inc, membukaamplorahasiaperusahaan. Isinyaadalah draft tawaranuntukkontrakmemasokkanvasranselpadaangkatanLaut AS. Surat memo dari CFO sheetbendmemintamengkajitawaranitusebelumdiajukan.

Tawarandandokumenpendukungnyadisiapkanolehstafpenjualansheetbend. Sheetbenddimintamemasok 100.000 yard kanvasranselselama 5 tahun, denganhargajualadalahtetapsebesar $30 per yard

Tn. Tar tidakbiasanyaterlibatdalampenjualan. TapitawaraninitidakakanberkomitmenpadaSheetbenddengankontrakjangkapanjangdanhargatetap. Keduamemproduksikanvasranselmembutuhkan $1.5 Tar mulaibekerjapadaakhirminggumengumpulkanfaktadanasumsisbb:

  • PabrikdiOleasantorodibanguntahun 1900 an dansekarangmenganggur. PabrikinidiusutkanpenuhdipermukaanSheetbend, kecualibiayapembeliantanah (19470 senilai $10,000
  • Sekarangtanahituadalahpropertipinggirpantai yang bernilai. Tar berfikirtanahdanpabrik yang mengangguritubisadijualdalamwaktudekatdenganharga $600,000

Merenovasipabrikakanberbiaya$500,000. invetasiiniakandiusutkasecaragarislurusselama 10 tahun

  • Mesinbaruakanberbiaya $1 juta. Investasiinibisadiusutkansecaragarislurusselama 5 tahun
  • Pabrik yang direnovasidanmesinbaruakanberusiabertahun-tahun. Akantetapi, pasar yang tersisauntukkanvasranselitukecil, dantidakjelasapakah order tambahanbisadiperolehbegitukontrak AL berakhir. Mesininikhususdanhanyanbisadigunkanuntukkanvasransel . Nilaijualbekasnyadiakhirtahunke lima mungkin nol.
  • Modal kerjapadaawaltahunadalah $300.000, dan modal kerjainidiperkirakan 10% dari total pendapatan.
  • Ramalanlabastafpenjualandarikontrak AL, dapatdilihatpadatabel 1
  • Saatiniadatawarandaripenjualandariperusahaanpengembang real estate untukmembelitanahdanpabrikPleasantboromilikSheetbenddenganharga $1,5 jutatunai
tabel 1 dalam ribuan
Tabel 1DalamRibuan

Apakah Tn. Tar seharusnyamerekomendasikanmengajukantawaranpada AL padaharga proposal $30 per yard?. Tingkat dikontountukproyek 12%


2. PT. “Dallas” sedangmengevaluasiproyekpembelianmesinbaru. HargamesinRp 175 juta, dengantambahanbiayapemasanganRp 25 juta. Usiamesinadalah 5 tahun. Nilaibukumesinpadaakhirtahunke 5 adalah 0, tapimesinmasihdapatdijualsebagibesituadenganharga 5 juta. Mesinmemerlukantambahan modal kerjabersihRp 10 juta, dandenganpenggunaanmesintersebutdapatmenghematbiayasebelumpajaksebesarRp 80 juta per tahun. Tingkat pajakadalah 15%. Haruskahmesindibeliapabilabiaya modal PT Dallas adalah 15% ?

what measure of risk is relevant in capital budgeting
What measure of risk is relevant in capital budgeting
  • In capital budgeting, a project can be looked at on three levels:
    • Stand-alone risk
    • Corporate risk
    • Systematic risk
stand alone risk
Stand Alone Risk

Mengukur stand-alone risk berartimengukurketidakpastiankeuntunganataukepastianaruskas

E(CF) = 5.000 E(V)= 5.000

Ơ A=1.095 ƠB=894


Apabila E(V) darikeduainvestasitidaksama, makapenggunaanƠsebagaiindikatorrisikomenjadisulitdilakukan, untukitudigunakan coefficient of variation (CV) CV = Ơ/E(V)

  • Misalkansaudaradimintauntukmemilihsalahsatudiantarakeduaproyekberikutini:


  • Denganmenggunakan NPV maksimum yang diharpkan, proyekmana yang saudarapilih?
  • Denganmenggunakancoenffidient of variation, proyekmana yang saudarapilih?
risiko proyek

Beberapametode yang bisadigunakanantara lain:

  • AnalisisSensitivitas
  • Analisis Scenario
  • AnalisisPohonKeputusan
  • AnalisisBerak Even
mean standard deviation analysis
Mean-standard deviation Analysis
  • Dilakukandenganmemasukanaruskasdarisetiapkondisiperekonomian, yang akanmembentukprobabilitasuntuk NPV kemudianmenghitungprobabilitasuntuk NPV tertentu.
  • Pendekataninimengasumsikanbahwaaruskasbersifatindependendariwaktukewaktu. Rata-rata (mean) distribusiprobabilitas NPV adalah:

krf= sukubungabebasrisiko


problem perusahaan anda memperoleh informas arus kas proyek sbb
  • Tentukan expected NPV, dan standard deviasi NPV
  • Berapaprobabilitasproyekakanmenghasilkan NPV=0
b sensitivity analysis
B. Sensitivity analysis
  • Sensitivity analysis involves determinan how the distribution of possible net present values or internal rates of return for a particular project is affected by a change in one particular input variable. This is done by changing the value of one input variable while holding all other input variables constant
example ekspansi proyek bqc
Example : Ekspansiproyek BQC

NPV (12%) = $6.989 IRR = 21,9%

keterbatasan analisis sentivitas
  • Umumnyarisiko stand-alone proyektergantungpadafaktor:
    • Sensitivitas NPV terhadapvariabelkunci
    • Rentangnilai yang mungkindarivariabeltersebutsepertitercermindalamdistribusiprobabilitasnay
  • Analisissensitivitashanyamempertimbangkanfaktor (1), makaanalisistidaklengkap
c scenario analysis
C. Scenario Analysis
  • Project analysis given a particular combination of assumptions

NPV yang diharapkan = Pi (NPVi)

ơNPV =


Shaoondustries is considering a proposed project for its capital budget. The company estimayes that the project’s NPV is $12 million. This estimate assumes that the company and market conditions will average over the next few years. The company’s CFO, howerer, forecast that there is only a 50 percent chance that the economy will be average. Reconizing this uncertainty, she has also performed the following scenario analysis.

What is the project’s expected NPV, standard deviantion and coefficient of variantion.

d analisis pohon keputusan
D. AnalisisPohonKeputusan
  • Digunakanuntukmengevaluasiproyek-proyek yang memilikibeberapatitikpembuatankeputusan. Aruskasdanprobabilitasnyadigambarkandalamsuatu diagram pohon yang disebutdenganpohonkeputusan. Kemudianprobabilitagabungandarisetiapcabangdikalikandengan NPV daricabangtersebutdanhasilnyadijumlahkanuntukmemperoleh expected NPV

= 17. 677


= 22.020

e break even analysis
E. Break Even Analysis


given the forecasted data on the next slide, determine the number of olanes that the company must produce in order to break even, on an NPV basis. The company’s cost of capital is 10%.

break even analysis
Break Even Analysis

Year 0 years 1-6

Investment $900


Sales 15.5xPlans Sold

Var. cost 8.5xPlanes Sold

Fixed Costs 175

Depreciation 900/6=150

Pretax Profit (7xPlanes Sold) - 325

Taxes (50%) (3.5x Planes Sold) – 162.5

Net Profit (3.5x Planes Sold) – 162.5

Net Cash Flow – 900 (3.5x Planes Sold) – 12.5

break even analysis1
Break Even Analysis

Answer (Accounting)

the break even point, is the # of Planes sold

were the fixed costs and depreciation = $0.


Break even akuntasitidakmemperhitungkan opportunity cost investasiawal$900, meskipunterjadi break even sebenarnyaperusahaanmasihrugisecaraekonomis, Manajerkeuanganbisamenghitung Break even denganmemasukan Present value alirankas.

0 = - (3.5 x Planes Sold – 162.5)

Planes Sold = 165.5/3.5 = 46.4 planes

Break even = FC + Depreciation

Price/unit – variable cost/init

break even analysis2
Break Even Analysis
  • Answer (finance)

the break even point, is the # of Planes sold that generates a NPV= $0

the present value annuity factor of a 6 year cash flow at 10% is 4.355 thus,

NPV = - 900 + 4.355 (3.5 x Planes Sold – 12.5)

break even analysis3
Break Even Analysis


solving for “Planes Sold”

Planes Sold = 63

0 = - 900 + 4.355 (3.5 x Planes Sold – 12.5)

  • Misalkanperusahaanmencobamenganalisisususlaninvestasi. InvestasiawalRp 1.000 juta, umur 5 tahun, tingkatdiskonto 20%. Perhitunganalirankassetiaptahunsbb:

Pertanyaan : tentukan Break even akuntansi, dan Present Value Break Even?


Methods for incrorporationg risk into capital budgeting

  • Certainly Equaivalent
  • Risk-Adjusted discount rates
certanty equivalent ce
Certanty Equivalent (CE)
  • Memasukanrisikodalamperhitunganaruskas
  • Konsep CE dapatditerapkandalam capital budgeting dengancara:
    • Perkirakan CE darikassetiaptahunberdasarkanaruskas yang diharapkanpadatahuntersebutdanrisikonya
    • Gunakantingkatbungabebasrisiko (rf) untukmenghitung NPV proyek

CE = t ACFt

                  • = aruskas yang pasti

aruskas yang diharapkan


Suatuperusahaandengantingkatpengembalian yang diinginkansebesar 10%, sedangmembangunsebuahfasilitaspenelitianbarudenganumur 5 tahun. Pengeluaranawalproyek$120.000. aruskasmasuk yang diharapkansertakoenfisientingkatkepastiansetaraadalahsebagaiberikut:

Hitung NPV proyek:

NPV =9.500 + 18.00 + 34.00 + 60.000 + 52.000 – 120.000

(1+10)1 (1+10)2 (1+10)3 (1+10)4 (1+10)5

NPV =$19.902,5


Norohna Inc, mempertimbangkan 2 proyek yang mutually exclusive. Nilai yang diharapkandariaruskasproyektersebutadalahsbb:

Jikatingkatbebasrisikosetelahpajakadalah 8%, proyekmana yang dipilih?

risk adjusted discount rates
Risk-Adjusted discount Rates
  • The use of the risk-adjusted discount rate based on the concept that investor demand higher returns for more risky projects
  • If the risk associated with the invesment is greater than the risk involved in a typical endeavor, then the discount rate is adjusted upward to compenaste for this risk
  • Expenssed mathematically the net present value using the risk-adjusted discount rate becomes
  • NPV h

ACFt - Io

t=1 (1+ i*)t


ACFt = the annual after-tax cash flow in time period

I0 = the initial outlay

i* = the risk adjusted discount rate

n = the project’s expected life

contoh risk adjusted discount rates
Contoh:Risk-Adjusted discount Rates
  • Hokie corporation mempertimbangkan 2 proyek mutually exlusive. Masing-masingproyekmensyaratkanpengeluaranawal$10.000 danakanberoperasiselama 5 tahun. Distribusiprobabilitastiapproyekuntuktahun 1 hinggatahun 5 sbb:

Olehkarenaproyek B yang lebihberisiko, makamanajemenmemutuskanuntukmenerapkantingkatpengembalian 15% padaevaluasinya, danhanya 12% untukproyek A.tentukan NPV masing-masingproyek.

NPV A =$8.024

NPV B = $10.113

risk adjusted discount rates1
Risk-adjusted discount rates
  • Biaya modal perusahaansecarakeseluruhanadalah 15%. Perusahaan menentukanjikaproyek yang dianalisismemilikirisiko yang relatifsamadenganproyek-proyek lain perusahaanpadaumumnya, ataumemiliki
  • Risikosamadengan rata-rata, i* = 15% (NPV=?)
  • Jikadiatas rata-rata, premirisikosebesar 5%, i* = 20%, NPV?
  • Jikadibawah rata-rata, premirisiko = - 5%. i*= 10%, NPV?
corporate risk
Corporate risk
  • Risikodalamperusahaanatau corporate risk adalahkontribusiproyekterhadaprisiko total perusahaan, ataudampakproyekterhadapvariabilitasaruskasperusahaansecarakeseluruhan
  • Corporate risk merupakanfungsidarideviasistandarproyekdankorelasiantarakeuntunganproyekdengankeuntunganperusahaan
  • Corporate risk diukurdengan

bP,F = within-firm risk atau corporate risk

ơp = deviasistandarkeuntunganproyek

ơF = deviasistandarkeuntunganperusahaan

rPF = koefisienkorelasiantarakeuntunganproyekdengankeuntunganperusahaan

bP,F = (ơp/ơF).rp.F

systematic risk atau market risk
Systematic risk atau market risk
  • Risikopasaratau beta risk adalahrisikosuatuproyekdilihatdarikonteksatausudutpandang investor yang memilikiportofoliosahamataukontibusiproyekterhadaprisikoportofolio
  • Risikopasardapatdiukurdenganmenghitung beta pasarproyekatau project marker beta
  • Beta proyekdapatdihitungdengancara:
    • meregresikeuntunganproyekdengankeuntunganportofoliopasar (sebagaivariabelbebas)
    • menggunakan beta dariperusahaan lain yang memilikibisnis yang samadenganproyek yang dianalisis

PT. AGA sedangmempertimbangkanpemebliantraktor yang akanmenelanbiayasebesarRp 100 juta, akanmeningkatkanaruskasoperasisebelumpajak (tidaktermasukefekdepresiasi) sebesar RP 40 jutasetahun. Trukakandidepresiasidenganmetodegarislurustanpanialisisa. Pajakadalah 15%, danbiaya modal perusahaanmengenaiusiatraktor. Secarakhusus Elizabeth meyakinkanbahwaiatahubanyaktentangtraktor yang hanyamampubertahun 4 tahunsaja. Philip setujudenganpendapat Elizabeth, tapiiamengatakanadabeberapatraktor yang dapatbertahansampai 5 tahun. Laura berkatabahwaiaadabebrapatraktordapatbertahansamapai 8 tahun. Direkturperusahaanterpaksamenengahiperdebatantersebut. Untuktidakmengecewakanmanajernyamakaiamemutuskanuntukmempertimbangkanpendapatketigamanajertersebutdenganmembuatanalisis scenario. Iamemberikanprobabilitas 70% bahwausiatraktor 5 tahun, 20% bahwausaitraktor 4 tahun, dan 10% bahwausiatraktor 8 tahun. Apakahpropoaslproyekpembeliantraktorinidapatditerima?

cost of capital
Cost of Capital

Objective :

to get a better understanding of how a company calculates and employs the cost of capital in making invesment decisions

cost of capital biaya modal
Cost of Capital (biaya modal)

Short term debt

Cost of debt (kd)

Long term debt


Preferred stock

Common stock

Cost of Equity (Ke)

New common stock

Retained earning

cost of capital1
Cost of Capital
  • Biaya modal adalah: biaya yang harusditanggunguntukmendapatkan modal baik yang berasaldariutang, saham, preferen, sahambiasaataulabaditahan.
  • Biaya modal akantercerminpadatingkatkeuntungan yang disyaratkanolehmasing-masingpemodal
cost of capital biaya modal1
Cost of Capital (biaya modal)

Manfaatbiaya modal dalammanajemenkeuangan:

  • Dipakaisebagai discount rate dalamperhitungan NPV
  • Dipakaisebagaitingkatkeuntungan minimal jikametode IRR digunakanuntukmengevaluasipropoaslinvestasi
menghitung biaya modal
Menghitungbiaya modal
  • Biaya modal harusdihitungberdasarkansuatu basis setelahpajak (after tax basis)
  • Masing-masingsumberdanamemilikibiaya modal yang berbeda
  • Perhitunganbiaya modal dilakukansecara
    • Individual
    • Keseluruhandenganmenggunakanbiaya modal rata-rata tertimbang (weighted average cost of capital)
1 biaya utang cost of debt
1. BiayaUtang (Cost of Debt)

Biayautang (kd) merupakanbesarnyabiaya yang harusditanggungolehperusahaankarenamenggunkandan yang berasaldaripinjaman, yang tercerminpadatingkatkeuntungan yang disyaratkanolehpemberipinjaman.

PN = penerimaanbersih, B= bunga, P= Nilai nominal, nn= Periodewaktu

contoh 1l
Contoh 1L
  • Andaikanseorang investor bersediamembayarRp. 900/lembaruntuksuatuobligasi (surathutang). Suratberhargatersebutmemilikinilainominlasebesar RP 1000/lembar, denganbungatahunan 8%, danjangkawaktupelunasan 10 tahun. Pajak 30%. Berpabiayaobligasitersebut? Kd=9,6%
  • Jikadikeluarkankomisi broker (flotation cost) Rp 50, makapenerimaanbersihRp 850, berapabiayaobligasitersebut? Kd =10,5%
  • Jikaobligasiterjualseharganilainominlakd = 8%
contoh 2
Contoh 2
  • Assume that basket Wonders (BW) has $1,000 per value zero-coupon bonds ountstanding. BW bonds are currently trading at $385.45 with 10 years to mutually. BW tax bracket is 40%

$0 + $1,000

$385.54 =

(1 + kd) 10

(1 + kd)10 = $1,000/$385.54

(1 + kd) = (2.5938) (1/10)

kd = 1 or 10%

2 the cost of capital for preferred stock
2. The cost of capital for preferred stock
  • Biaya modal sahampreferenadalahtingkatkeuntungan yang disyaratkanolehpemegangsahampreferen
  • Biayasahampreferenadalahdividensahampreferentahunandibagihasilpenjualansahampreferen.


Kps =


  • PT damaimenegluarkan 10% (devidentahunan) sahampreferendengannilai nominal Rp 10.000 per lembar. Biayapenerbitandanpenjualandiperkirakan 5%. Berapabiayasahampreferen?

jawab: kp = 1000/9500 = 10,52%

  • Perusahaan menjualsahampreferen yang memberikandividen$10 per thaun. Hargasaham $100, denganbiaya flotation cost $2,5 per lembarsaham. Berapasahampreferen?

What the cost of prefern stock?

Pp =$113,10; 10% Q; Par = $100; F =$2

use this Formula

0.1 ($100)


$113.10 - $2.0


= = 0.090 =9.0%



Kps =


3 the cost of capital for common equity
3. The cost of capital for common equity

Common equity:

  • Retained Earnings
  • New Common Stock
why is there a cost for retained earnings
Why is there a cost for retained earnings?
  • Earnings can be reinvested or paid out as dividends
  • Investor could buy other securities, earn a return
  • Thus, there is an opportunity cost if earnings are eran on alternative investments of equal risk
  • They could buy similar stocks its own stock and company could repurchase its owen stock and earn Ks. So, Ks is the cost of retained earnings.
3 biaya laba ditahan
3. Biayalabaditahan
  • Biaya modal sendiri yang berasaldarilabaditahanmerupakantingkatkeuntungan yang disyaratkanoleh investor modal sendiri.
three ways to determine cost of retained earnings ks
Three ways to determine cost of retained earnings, ks:
  • CAPM: ks = kRF + (kM – ckRF).
  • DCF : ks = D1/P0 + g
  • Own-Bond-Yield-Plus-Risk

premium :

ks = kd + RP.

cost of retained earnings based on the capm
Cost of retained earningsbased on the CAPM
  • Following information is known:

- KRF = 70%

- MRP = 6%

ks + kRF + (kM – kRF)

ks = 7% (6%) 1,2

ks = 14,2%

the cost of retained earnings based on the dcf method
The cost of retained earnings based on the DCF-method
  • Use the DCF formula, when the following information is known

- Do =$4.19

- Po =$50

- g=5%.

the cost of retained earnings based on the dcf method1
The cost of retained earnings based on the DCF-method

Ks = D1 + g = Do (1+g) + g

Po Po

= $4.19(1.05) + 0.05


=0.088 + 0.05

= 13.8%

find k s using the own bond yield plus risk premimum method k d 10 rp 4
Find Ksusing the own-bond-yield-plus-risk-premimum method(Kd=10%, RP = 4%)

ks = kd + RP

ks = 10.0% + 4.0 = 14.0%

what s a reasonable final estimate of k s
What’s a reasonable final estimate of Ks


CAMP 14.2%

DCF 13.8%

Kd + RP 14.0%

Average 14.0%

4 biaya modal saham biasa baru
4. Biaya modal sahambiasabaru
  • Biaya modal sahambiasabarulebihtinggidibandingkanbiaya modal labaditahan, halinidikarenakanadanyabiayapenerbitansahambaru (flotation cost)

Ke= D1 + g

Po - F


Po =Hargasahambiasasaatini

D1 =Dividen yang diharapakantahunmendatang

Ke = Tingkat keuntungna yang disyaratkanolehpemodalsahambiasa

g =Tingkat pertumbuhandividen

F =Biayapenerbitansaham

the cost of capital for new common stock
The cost of capital for new common stock
  • Use the DCF formula, when the following information is known:
    • Do = $4.19
    • Po = $50
    • g = 5%
    • Flotation costs = 15%
  • Remember, flotation reduce the revenus for the issuing firm, thus lower Po .
new common stock f 15
New common stock, F = 15%

ke= Do(1 + g) + g

Po (1 – F)

= $4.19(1.05) + 5.0%

$50(1 – 0.15)

= $4.40 + 5.0% = 15.4%


flotation adjustment ke ks 15 4 13 8 1 6
Flotation adjustment:ke – ks = 15.4% - 13.8% = 1.6%

Add the 1.6% flotation adjustment to average ks = 14% to find average ke

Ke = ks + flotation adjustment

Ke = 14% + 1.6% = 15.6%

calculating the wacc
Calculating the WACC
  • Calculating the WACC, when a company finances with 30% debt, 10% preferred stock and 60% common equity
  • The formula for the WACC is

WACC = wdkd (1 – T) + wpskps + wceKs

  • First use only the retained earnings component of common equity (wce)
what s wacc using only retained earnings for equity component of wacc 1
What’s WACC using only retained earnings for equity component of WACC1

WACC = wdkd (1 –T) + wpskps + wceks)

= 0.3 (10%)(0.6) + 0.1(9%) = 0.6)14%)

= 1.8% + 0.9% + 8.4% = 11.1%

= cost per $1 financed until retained earnings used up


The capital structure for the bias corporation follows. The company plans to maintain its debt structure in the future. If the firm has a 6 percent after tax cost of debt, a 13.5 percent cost of preferered stock, and a 19 percent cost of common stock. What is the firm’s weighted cost of capital?

  • Target struktur modal perusahaanadalah 30% hutang, 10% sahampreferen, dan 60% modal sendiri (yang seluruhnyaberasaldarilabaditahan). Biayahutang 12%, biayasahampreferen 12,6%, danbiayalabaditahan 16,5%. Pajak 40%. Tentukan WACC?
  • Struktur modal untukperusahaan “Crayon” adalahsbb. Perusahaan berencanauntukmempertahankanstrukturutangnyadiamsamendatang. Jikaperusahaanmemiliki 5,5% biayautangsetelahpajak, 13,5% biayasahampreferen, dan 18% biayasahambiasa. Tentukan WACC?
marginal cost of capital
Marginal cost of capital
  • MCC merupakanbiayauntukmemperoleh rupiah tambahansebagai modal baru.
  • Membuatskedul MCC membutuhkaninformasimengenai
    • Biaya modal (WACC) daripenggunaanalternatif modal sendiri, labaditahandansahaambiasabaru.
    • Titikpeningkatan MCC (break point): merupakantitikmeningkatnya WACC perusahaankarenasemualabaditahantelahdigunakandalampendanaan.

Break point = labaditahan

proporsi modal sendiri

  • Suatuperusahaanmembutuhkan modal barusebanyak 500 juta. Struktur modal yang hendakdicapaiadalah 30% hutang, 10% darisahampreferendan 60% dari modal sendiriberupalabaditahanatausahambiasabaru. Biaya 12,6%; 16% dan 16,8%. Perusahaan berharapdapatmenahanlabaRp 100 juta. Buatlahskedul MCC untuk modal baruini.
Contoh :
  • WACC jikamenggunkanlabaditahan

= 0,3x8,4% + 0,1x12,6% + 0,6x16% = 13,38%

  • WACC jikamenggunakansahambiasabaru

= 0,3x8,4% + 0,1x12,6% + 0,6x16,8% = 13,86%

  • Break point

= 100 juta/0,6 + 166,67 juta

padasaatdanabaru yang digunakanmencapaiRp 166,67 juta, makaperusahaantelahmenggunakanseluruhlabaditahan. Setelahjumlahini, makaperusahaanharusmenerbitkansahambiasa.

skedul mcc
Skedul MCC





Modal baru

166,67 juta

skedul mcc dengan depresiasi
Skedul MCC dengandepresiasi
  • Melanjutkansoalsebelumnya, misalkandiketahuibahwaperusahaanmemilikidanadaridepresiasisebesar 50 juta. Sekdul MCC akanmenjadi

WACC= 13,86%


WACC= 13,38

216,67 juta

50 juta


  • Adalahtitikdimanaseluruhdanadepresiasitelahdipakaihabis
  • Adalahtitikdimanaseluruhlabaditahantelahdipakaihabis
investment opportunities schedule ios
Investment Opportunities Schedule/IOS
  • IOS adalahsuatugrafiuk yang menggambarkanproyek-proyek yang potensialdalamsuatuurutanberdasarkan ranking IRR proyektersebut


  • Misalkan PT.XX memilikibeberapakesempataninvestasi yang terbaik (pengembaliantertinggi) sapai yang terburuk (pengembalianterendah) seperti table berikut:
  • Proyekmanakah yang dipilih
skedul kesempatan investasi1


15% IRR

14% A IRR

13 B IRR

12 C IRR 12,1% MCC

11 D IRR



0 100.000 600.000 1.000.000

Proyek yang layakdipilihadalahproyek: A, B, C, D, E karena IRR > MCC proyek.


PT Sentosasedangmenyusunanggaranuntuktahunmendatang. PT sentosamemperkirakanlababersihRp 75juta, dandividen payout ratio (DPR) adalah 40%. Dana darideprisiasidiperkirakanRp 30 juta. Penghasilandandividenperusahaandiperkirakantumbuhsecarakonstansebesar 5%/tahun. DividensaatiniadalahRp 90, danhargapasarsahamsaatiniRp 859. bungakreditbarudari bank adalah 14%. Biayaemisisahambaru 20%. Struktur modal yang optimal adalah 60% modal senidridan 40% hutang. Pajak 40% PT Sentosamemilikikesempataninvestasiproyek yang bersifatindependen, sbb:


Labaditahan = 75 juta-40% (75juta)= 45juta

Biayalabaditahan : ks = D1/Po + g

= 90(1+0,05) +0,05 =18,75%


Biasasahambiasabaru = 90 (1 + 0,05) + 0,05 = 18,75%

859 (1-0,2)

WACC1 = 12,96%

WACC2 = 14,61% (jikamenggunakansahambiasabaru)

Breka point = 45/0,6 = 75 juta

Karenaadadepresiasi 30 juta, maka break point = 105 juta






14,61% MCC


12,96% D IOS


100105 150 200 300 400 500 600

Proyek A, C dan D diterima. Anggaran modal optimal= 420 juta


1. PT ABC inginmelakukanekspansidalamsituasi yang cukupsulitsepertisekarangini. Dari perhitunganbiaya modal rata-rata diketahuibahwasemakintinggikebutuhandana, makaakanmeningkatkancost of capital. Sumberdanaberasaldari modal sendirisebesar 40%, pinjaman bank 35% dan 25% berasaldaripenerbitanobligasi. Berikutiniadalah table cost of capital untukmasing-masing interval kebutuhandana.

Setelahdilakukanstudikelayakan, diperolehinformasibahwatingkatkeuntungandari 6 proyektersebutadalah:

Proyekmanakah yang layakdilaksanakan? Dan berapaanggaran modal yang optimal?

2 pt angkasa memiliki struktur modal sbb
2. PT “Angkasa” memilikistruktur modal sbb:

Perusahaan mengharapkankenutunganbersih 16.000.000, -tahunini. DPR 25%, pajak 40%, dan investor mengharapkanpendapatandanindividentumbuh 9% dimasamendatang. Tahunlaluperusahaanmembayardividen 3.600,-(Do=3600), dansaatinihargasaham 60.000,- per lembar. Sukubungabebasrisikoadalah 11%, dansuatusaham rata-rata memberikan rate of return yang diharapkansebesr 14%. Beta saham PT Angkasaadalah 1,5. sahambarumemilikiflotation cost 10%

Sahampreferendapatdijualkepublikdenganharga 100.000,- per lembar, dengandividen 11.000,-. Flotation cost 5.000,- per lembar.

Hutangdapatdijualdenganmembayarbungasebesar 12%

  • Hitungbiaya modal dari: hutang, sahampreferen, labaditahn, dansahambiasabaru
  • Tentukan Retained Earning Break Point
  • Tentukan WACC denganmenggunakanlabaditahan, dan WACC denganmenggunakansahambiasabaru.
  • Gambarkanskedul MCC
  • Misalkan PT Angkasameramalkanbahwabiayadepresiasiuntukperiode yang direncanakanadalah 10.000.000,-. Bagaimanainimempengaruhiskedul MCC?