Tugas Individu Manajemen Keuangan kelas 3-3 DIII Kebendaharaan Negara PKN STAN

1. TUGAS MANAJEMEN KEUANGAN
OLEH
NAMA : Gita M. Ovelia
NPM : 4301170300
NO. ABSEN : 15
KELAS : 3-3
PRODI : DIII Kebendaharaan Negara
JURUSAN : Manajemen Keuangan

2. Risk analysis and project evaluation
►Why does risk analysis important?
There are two fundamental reasons to perform a project risk analysis before
making the final decision (accept/reject):
Project cash flows are risky and may not be equal to the estimates of future cash
flows used to compute NPV.
Forecasts are made by humans who can be either too optimistic or otherwise when
making their cash flow forecasts.
►Key concepts̶ expected values and value drivers
The cash flows used in the calculation are actually the expected values of the
investment’s risky cash flows. That is simply a probability-weighted average of all
the possible cash flows that might occur.
Ex:
Two possible cash flows: $200 and $520
Probabilities of the cash flows, respectively: 20% and 80%
Expected value?
Expected value = 0.2 (200) + 0.8 (520)
= $420
Value drivers are the basic determinants of an investment’s cash flows. It consists
of fundamental determinants of project revenues (market size, market share, unit
price) and costs (variable and fixed costs, exclude depreciation expense).
►Types of analysis
1. Sensitivity analysis
It occurs when a financial manager evaluates the effect of each value driver on the
investment’s NPV. It also helps identify the variable that has the most impact on
NPV.

3. Ex:
Company X’s management has determined that it will be possible to reduce the
variable cost per unit down to $18 per unit by purchasing an additional option for
the equipment that will raise its initial cost to $1.8 million (the residual or salvage
value for this configuration is estimated to be $300,000). All other information
remains the same as before. For this new machinery configuration, analyze the
sensitivity of the project NPV.
Consider the following changes:
• Unit sales (-10%)
• Price per unit (-10%)
• Variable cost per unit (+10%)
• Cash fixed costs per year (+10%)
Projected cash flows for year 0-5:
Year-0 Years 1-4 Year-5
Revenues 5,000,000 5,000,000
Less: Variable cost $ (3,600,000.00) $ (3,600,000.00)
Less: Depreciation
expense
(300,000.00) (300,000.00)
Less: Cash fixed cost (400,000.00) (400,000.00)
Net operating income $ 700,000.00 $ 700,000.00
Less: Taxes $ (210,000.00) $ (210,000.00)
Net operating profit after
tax
490,000.00 490,000.00
plus: Depreciation
expense
300,000.00 300,000.00
less: CAPEX $ (1,800,000.00) 300,000.00
less: change in working
capital
(500,000.00) 500,000.00
Free cash flow $ (2,300,000.00) $ 790,000.00 $ 1,590,000.00

4. Compute the NPV and IRR:
Year Free Cash Flow
0 $ (2,300,000.00)
1 $ 790,000.00
2 $ 790,000.00
3 $ 790,000.00
4 $ 790,000.00
5 $ 1,590,000.00
NPV $1,001,714.68
IRR 26.65%
The impact of NPV of changes in the value drivers:
Year Free Cash Flow
0 $ (2,300,000.00)
1 $ 790,000.00
2 $ 790,000.00
3 $ 790,000.00
4 $ 790,000.00
5 $ 1,590,000.00
NPV $1,001,714.68
IRR 26.65%
*A 10% adverse change in value drivers has a significant on NPV. NPV is most
sensitive to changes in the selling price and variable cost.

5. 2. Scenario analysis
It involves changing one value driver at a time and analyzing its effect on the
investment NPV.
Scenario analysis allows the manager to simultaneously consider the effects of
changes in the estimates of multiple value drivers.
Ex:
The deepening recession that characterized the economy caused Company X’s
management to reconsider the base-case scenario for the project by lowering their
unit sales estimates to 175,000 at revised price per unit of $24.50. Based on these
projections, is the project still viable? What if Company X followed a higher price
strategy of $35 per unit but only sold 100,000 units? What would you recommend
the company to do?
Scenario 1 Scenario 2
Unit sales 175,000.00 100,000.00
Price per unit $24.50 $35
Scenario I
Year 0 Years 1-4 Year-5
Revenues $ 4,287,500.00 $ 4,287,500.00
Less: Variable cost (3,500,000.00) (3,500,000.00)
Less: Depreciation
expense
(250,000.00) (250,000.00)
Less: Cash fixed cost (400,000.00) (400,000.00)
Net operating income $ 137,500.00 $ 137,500.00
Less: Taxes $ (41,250.00) $ (41,250.00)
Net operating profit
after tax
$ 96,250.00 $ 96,250.00

6. plus: Depreciation
expense
$ 250,000.00 $ 250,000.00
less: CAPEX $ (1,500,000.00) 250,000.00
less: change in working
capital
(500,000.00) 500,000.00
Free cash flow $ (2,000,000.00) $ 346,250.00 $ 1,096,250.00
NPV: $(326,276.10)
IRR: 6,29%
Scenario II
Year 0 Years 1-4 Year-5
Revenues $ 3,500,000.00 $ 3,500,000.00
Less: Variable cost $ (2,000,000.00) $ (2,000,000.00)
Less: Depreciation
expense
$ (250,000.00) $ (250,000.00)
Less: Cash fixed cost $ (400,000.00) $ (400,000.00)
Net operating income $ 850,000.00 $ 850,000.00
Less: Taxes $ (255,000.00) $ (255,000.00)
Net operating profit
after tax
$ 595,000.00 $ 595,000.00
plus: Depreciation
expense
$ 250,000.00 $ 250,000.00
less: CAPEX $ (1,500,000.00) $ 250,000.00
less: change in working
capital
$ (500,000.00) $ 500,000.00
Free cash flow $ (2,000,000.00) $ 845,000.00 $ 1,595,000.00

7. NPV: $1,471,606
IRR: 36%
>>Two examinations above reveal that this is a risk opportunity as there’s a wide
divergence in the NPV estimates.
3. Simulation
It generates thousands of values for each of the investment’s value drivers.
Simulation process involves the following five steps:
Select appropriate probability distribution for each of the investment’s key value
drivers.
Randomly select one value for each of the value drivers from its respective
probability distributions.
Combine the values selected for each of the values drivers to estimate project cash
flows for each year of the project’s life, and calculate the project’s NPV.
Store or save the calculated value of the NPV, and repeat Steps 2 and 3. Computer
softwares allows one to easily repeat Steps 2 and 3 thousands of times.
Use the stored values of the project NPV to construct a histogram or probability
distribution of NPV.
►Break-even analysis
This analysis determines the minimum level of output the firm must achieve in
order to avoid losing money. Break-even sales is defined as the level of sales
which net operating income equals zero.
Ex:
The fixed costs of Company A consist of property taxes, a lease, and executive
salaries, which add up to $100,000. The variable costs associated with producing
one water bottle is $2 per unit. The water bottle is sold at a premium price of
$12. To determine the break-even point of Company A’s premium water bottle:

8. Break even quantity = $100,000 / ($12 – $2) = 10,000
>>Company A would need to sell 10,000 units of water bottles to break even.
►Accounting break-even
It involves determining the level of sales necessary to cover variable and total fixed
costs.
Qaccounting breakeven =
𝑡𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 (𝐹)
𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 (𝑃)−𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡 (𝑉)
=
𝑡𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 (𝐹)
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
Ex:
Output Variable costs Fixed costs Total costs
5,000 $1,200,000 $600,000 $1,700,000
10,000 $2,400,000 $600,000 $2,900,000
15,000 $3,600,000 $600,000 $4,200,000
20,000 $4,800,000 $600,000 $5,300,000
Qbreak-even = F ÷ (P-V)
= $600,000 ÷ ($265-$240)
= $600,000 ÷ $25
= 24,000 units
output Variable
costs
Fixed costs Total costs Revenue Profit
5,000 $1,200,000 $600,000 $1,700,000 $1,100,000 (600,000)
10,000 $2,400,000 $600,000 $2,900,000 $2,400,000 (500,000)
15,000 $3,600,000 $600,000 $4,200,000 $3,800,000 (400,000)
20,000 $4,800,000 $600,000 $5,300,000 $5,000,000 (300,000)
24,000 $5,760,000 $600,000 $6,360,000 $6,360,000 0

9. *Projects the merely break-even in an accounting sense have negative NPVs and
results in a loss of shareholder value.
►Cash break-even
Tells us the level of sales where we have our cash fixed costs (≠depreciation) and
as a result the cash flow is zero.
Cash break-even =
𝑡𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 (𝐹)−𝑑𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛
𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
Ex:
Suppose Company X sells products for $25 each, and has variable costs of $15 to
produce each unit. In addition, the company has fixed costs of $50,000, and $2,000
of the fixed costs is depreciation. The calculation starts by setting the $25 unit cost
equal to the sum of the $15 unit variable costs and fixed costs less depreciation, or
$48,000. The equation is restated by subtracting the $15 variable cost per unit from
each side of the equation, to set the result to a $10 unit cost that is equal to $48,000
of net fixed costs. Dividing each side of the equation by the $10 unit cost returns a
result of 4,800. This result shows that Company X must sell 4,800 units of product
at $25 each in order to meet its cash break-even point.
►NPV break-even
Identifies the level of sales necessary to produce an NPV of zero. It differs from
accounting break-even analysis in that NPV break-even focuses on cash flows.
Degree of Operating Leverage (DOL)
DOL =
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑁𝑂𝐼
%𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠
*DOL is not constant but decreases as the level of sales increase beyond break-
even point.
Ex:
Year 1 Year 2

10. Sales: $500,000 Sales: $600,000
Operating expense: $150,0000 Operating expense: $175,000
EBIT = sales – operating expense EBIT = $600,000 - $175,000
= $500,000- $150,000 = $425,000
= $350,000
% change in EBIT = $425,000 ÷ $350,000 - 1
= 21,43%
% change in sales = $600,000 ÷ $500,000 -1
= 20%
DOL =
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑁𝑂𝐼
%𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑠𝑎𝑙𝑒𝑠
= 21.43% / 20%
= 1.0714
►Real Options in Capital Budgeting
Most common sources of flexibility or real options that can add value to an
investment opportunity include:
1. Timing options
2. Expansion options
3. Contract, shut-down, and abandonment options
Intermezzo:
• Fixed cost
Remains constant despite any changes in the business.
• Variable cost
A cost that vary with the firm sales. Variable costs per unit remain the same
regardless of the level of output.