Assessing The Financial Feasibility Study of QRS Company New Branch

Abstract

The automotive industry in Indonesia, especially motorcycles, grows every year. This creates a bright future for Indonesia's motorcycle sector in particular. Established in 2000, QRS Company is a business engaged in the motorcycle spare parts industry in Tasikmalaya. After seeing the rapid growth of motorcycle users in Indonesia and the significant increase of their revenue, QRS Company wants to expand their business by creating a new branch. Feasibility study is a study that is conducted to assess whether the project is profitable or not. This research begins by conducting projections from financial statements to estimate the QRS Company financial condition in the future. This research was made using capital budgeting analysis. This study aims to assess the financial feasibility and also the risk in capital budgeting by using sensitivity analysis and simulation analysis. Expansion project carried out by QRS Company can be categorized as feasible. The calculation shows that the NPV of the project is positive valued. The payback period of the QRS Company expansion project is faster than the maximum return period of 5 years. The IRR is smaller than the WACC. In addition, the risk analysis shows that the expansion project of QRS Company has a low risk.