CASE OF NPV & OTHERS CRITERIA INVESTMENT

1. Buy Coastal, Inc. imposes a payback cutoff of three years for its international investment
projects. If the company has the following two project available, should it accepted either of
them?

Year Cash Flow (A) Cash Flow (B)

0 -$40.000 -$60.000
1 19.000 14.000
2 25.000 17.000
3 18.000 24.000
4 6.000 270.000
Jawaban
Project A
Total cash flow A selama 2 tahun
19.000+25.000=44.000
sehingga arus kas pendek sebesar 4.000 (44.000-40.000) mengambil kembali investasi awal,
pengembalian untuk proyek A adalah
payback = 2 +($4.000/$18.000 )= 2,22 year
Project B
Total cash flow A selama 3 tahun
14.000 + 17.000+24.000 = 55.0000
sehingga arus kas pendek sebesar 5.000 (60.000-55.000) mengambil kembali investasi awal,
pengembalian untuk proyek B adalah
payback = 3+ ($5000+270.000)=3,01 yers
using the payback criterion and a cutoff of three year, accept project A and reject project B

2. To expand her business, Ms. Wimala is considering to open a new branch flower shop at
Bandung or at Surabaya. The financial data of both options are as follow:

Shop at Bandung Shop at Surabaya

Initial Cash Outlays Rp 2 billions Rp 1.4 billions
 Proceed/Cash flow per year Rp 0.6 billions Rp 0.5 billions
Project period 4 years 3 years

If Ms. Wimala has 8 percent of cost of capital, which is regarded as discount rate for both of
this projects, so calculate the NPV, PP dan DPP on both of these projects.
Jawaban

I Bandung = 2 I Surabaya = 1,4

CiFt Bandung = 0,6 CiFt Surabaya = 0.5
Proceed = 4 tahun Proceed = 3 tahun
n
CiFt
NPV   I
t 1 (1r )
t

NPV bandung =[0,6 / (1+0,08)1 + 0,6 / (1+0,08)2 + 0,6 / (1+0,08)3 + 0,6 / (1+0,08)4 ] – 2
NPV bandung = (0,56+0,51+0,47+0,44) – 2
NPV bandung= 1,98 – 2 = -0,02

NPV Surabaya = [0,5/(1+0,8)1+0,5/(1+0,8)2+0,5/(1+0,8)3]-1,4

NPV Surabaya = (0,46+0,42+0,39)-1,4

NPV Surabaya = 1,27-1,4

NPV Surabaya = -0,13

Independent = jika dua duanya negative, maka decision rule independent tidak di terima
ME = jika dua daunya negative pilih nilai negative yang paling terkecil (yang Ruginya paling kecil)maka di pilih
NPV bandung

Payback=

Year Bandung surabaya

1 0,6(0,56)=1,44 0,5(0,46)=0,94
2 0,6(0,51)=0,93 0,5(0,42)=0,52
3 0,6(0,47)=0,46 0,5(0,39)=0,13
4 0,5(0,50)
0,6(0,44)=0,02
5 0,6
Bandung
Total cash flow bandung = 2

Payback = 3+(0,2/0,6)= 3,33 yers

Surabaya
Total cash flow Surabaya atau investasi =1,4
Payback = 2 + (0,4/0,5)=2,80 year
DPP Bandung = 4 year + (0,02/0,60)= 4,03 year
DPP Surabaya = 3 year + (0,13/0,50)= 3,26year

3. Mahjong, Inc., has identified the following project which has discount rate 12 percent,

Year Projected Cash Flow

0 -$43,000
1 7,000
2 13,800
3 24,000
4 26,000

a. Calculate the discounted payback period of this project and if the company set criterion
acceptance that discounted payback period of the similar project is four years, should the
company accepted the project based on the discounted payback?

b. If the required return is 12 percent, what is the net present value of this project and based on
this technique, should the company accepted or recjected the project?

c. Calculate the internal rate of return of this project, and if hurdle rate for this project is 15%,
should this project be accepted?

d. Calculate the PI that project?