case 8 primus automation division
TRANSCRIPT
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7/23/2019 CASE 8 Primus Automation Division
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1. Primus Automation
2. Primus Background
3. Avanjet
4. Avanjet Background
5. Analysis buy and borrow option
6. Variant Analysis7. Conclusion/Suggestion
8. Lesson Learn
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Merupakan perusahaan global yang menghasilkanproduk-produk inovative berupa automation systemproducts and services yang beroperasi di negara-negara : United States, Europe, and Asia.
Produk yang dihasilkan berupa :Programmable controllersNumerical controllers
Industrial computersManufacturing softwareFactory-automation systemsData communication networks
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Sasaran perusahaan adalah : Memelihara kinerjaperusahaan sebagai pemimpin pasar denganmeningkatkan sales 15%/tahun denganpencapaian target pada net income dan working
capital turnoverKondisi yang dihadapi adalah :1. Pertumbuhan ekonomi yang melambat2. Meningkatnya persaingan
3. Aliansi yang bersifat cross continental4. Muncul produk baru5. Bergesernya transaksi dari pola penjualan menjadi
leasing
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Pabrik pembuat corporate-jet aircraft.Untuk melakukan cost reduction dan mempercepat
companys production line. Avantjet membutuhkan
automation system
Beberapa catatan penting dalam meningkatkan
kinerja :
Mempunyai permasalahan perimbangan Asset
dan Hutang yang high leveraged CEO mempunyai kebijakan untuk tidak
mengeluarkan CAPEX yang akan berpengaruh
negatif terhadap the income statement and
balance sheet
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Beberapa alternatif yang akan dilakukan Avantjetuntuk pengadaan automation sysytem adalah :
1. Melalui pinjaman
2. Pengadaan melalui conditional sale dimana kepemilikan
akan berpindah pada saat pembayaran final
3. Sistem sewa peralatan :
1. Capital Lease
2. Operating Lease
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Avantjet's Statement of Income ($000) 2001 2000 1999
Sales 576,327 575,477 432,522
Other income 9,985 6,976 9,677
Gross income 586,312 582,453 442,199Cost of goods sold 425,076 423,443 325,016
Selling, general, & admin. 43,624 36,215 35,632
Research & development 13,773 12,873 9,064
Interest 84,062 87,259 27,002
Total expenses 566,535 559,790 396,714
Income before taxes 19,777 22,663 45,485
Taxes 9,690 11,105 22,288
Net income 10,087 11,558 23,197
Avantjet's Balance Sheet ($000) 2001 2000
Assets Current assets:
Cash and temporary investments $19,918 $27,263
Accounts receivable 37,791 37,307Inventories 310,180 323,101
Prepaid expenses 13,928 13,362
Total current assets 381,817 401,033
Property, plant, and equipment:
Land 2,245 2,245
Buildings 30,654 30,229
Machinery and equipment 26,932 21,244
Furniture and fixtures 1,683 1,520
Construction in progress 1,668 885
63,182 56,123Less accumulated depreciation 12,634 8,267
Net property, plant, and equipment 50,548 47,856
Other assets 640,369 648,339
Total assets $1,072,734 $1,097,228
Liabilities and stockholders' equity
Current liabili ties:
Long-term debt $592 $563
Accounts payable 42,355 38,760
Notes payable 4,750 5,764
Accrued comp., int. & other liabilities 39,627 43,855
Deposits and progress payments 146,964 160,946
Total current liabilities 234,288 249,888
Long-term notes payable to banks 646,633 671,225
Deferred income taxes 42,661 41,498
689,294 712,723
Common stockholders' equity:
Common stock 3,385 3,027
Capital in excess of par value 74,081 69,770
Retained earnings 72,017 62,156
Less common stock in treasury (331) (336)Total stockholders' equity 149,152 134,617
Total liabilities and stockholders' equity $1,072,734 $1,097,228
Financial Ratio 2001 2000
Liquidity
Current Ratio 1.63 1.60
Acivity Ratio
Inventory Turnover 1.37 1.31
Average Col lection Period (day) 23.61 23.34
Total Asset Turnover 0.54 0.52
Debt Ratio
Debt Ratio 86% 88%
ProfitabilitasGross Profit Margin 27.50% 27.30%
Net profit Margin 1.75% 2.01%
Avantjet mempunyai ratio hutangyang besar, sedang net profitmenurun
Pembelian dengan hutang akanmemperburuk kondisi keuangan
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Income Tax Depreciation
Year Percentage
1 20.00
2 32.00
3 19.20
4 11.52
5 11.52
Rate Schedule
5-year MACRSTerm under hypothetical leasing & buy-borrow strategies
Loan ("Buy-and-Borrow")
Equipment cost $715,000
Cash down payment $0
Loan amount $715,000
Lease Annual payments 5-year Payment/Year
Leasing option #1 $155,040
Leasing option #2 $160,003
Leasing option #3 $162,350
Leasing option #4 $164,760
Both Methods
Guaranteed residual value: 11.2729%
Investment tax credit 0%
Depreciation 5-year MACRS
Purchase Price Quoted Annual Lease Expenses
if Avanjet were to buy and Resd' l Value for 5 year
Faulhaber Gmbh 759,000.00$ $ 170000, 15% residual value
Honshu Heavy Industries 737,000.00$ $ 163000, 24% residual value
Primus Automation Division 715,000.00$ -
System Manufacturer
Proposal pengadaan dari kompetitor
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Option 1 0 1 2 3 4 5Net Purchase Price -715,000
Depreciation Tax Savings 48,620 77,792 46,675 28,005 28,005
Lease Payment 155,040 155,040 155,040 155,040 155,040
Tax on Lease Payment -52,714 -52,714 -52,714 -52,714 -52,714
Residual Value 67,199Tax on Residual Value -13,402
Net Cash Flow -612,674 150,946 180,118 149,002 130,332 81,803
NPV (23,002)
IRR 4.64%
Option 2 0 1 2 3 4 5
Net Purchase Price -715,000
Depreciation Tax Savings 48,620 77,792 46,675 28,005 28,005
Lease Payment 160,003 160,003 160,003 160,003 160,003
Tax on Lease Payment -54,401 -54,401 -54,401 -54,401 -54,401
Residual Value 67,199
Tax on Residual Value -13,402
Net Cash Flow -609,398 154,222 183,394 152,277 133,607 81,803
NPV (9,304)
IRR 5.61%
Option 3 0 1 2 3 4 5
Net Purchase Price -715,000
Depreciation Tax Savings 48,620 77,792 46,675 28,005 28,005
Lease Payment 162,350 162,350 162,350 162,350 162,350
Tax on Lease Payment -55,199 -55,199 -55,199 -55,199 -55,199
Residual Value 67,199
Tax on Residual Value -13,402
Net Cash Flow -607,849 155,771 184,943 153,826 135,156 81,803
NPV (2,827)
IRR 6.07%
Option 4 0 1 2 3 4 5
Net Purchase Price -715,000
Depreciation Tax Savings 48,620 77,792 46,675 28,005 28,005
Lease Payment 164,760 164,760 164,760 164,760 164,760
Tax on Lease Payment -54,401 -54,401 -54,401 -54,401 -54,401
Residual Value 67,199
Tax on Residual Value -13,402
Net Cash Flow -604,641 158,979 188,151 157,034 138,364 81,803NPV 10,587
IRR 7.02%
Primus prop. NPV IRR
Option-1 (23,002) 4.64%Option-2 (9,304) 5.61%
Option-3 (2,827) 6.07%Option-4 10,587 7.02%
Agar NPV = 0 dan
IRR = 6.27% makaLease payment harus$163.375PadaTax rate =34%Cost od debt = 9.5%
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Loan Amortization schedule
Borrowing 715,000Interest 9.50%
Year 1 2 3 4 5
Beginning balance 715,000 596,713 467,189 325,360 170,057
Annual payment 186,212 186,212 186,212 186,212 186,212 186,212
Interest before tax 9.5% 67,925 56,688 44,383 30,909 16,155
Principal reduction 118,287 129,524 141,829 155,303 170,057
Ending balance 596,713 467,189 325,360 170,057 0
Tax rate 34%
Interest after tax 44,831 37,414 29,293 20,400 10,663
Annual Payment = PMT(Pretax Annual Rate, Term, -715000)
Untuk Leasing option #1,#2,#3 & #4Tax rate 34% Eq cost 715,000
Pre tax interest 9.50% Disc rate 6.27%
Intrst. Paymt Principal Deprc. Deprc. Deprc. Tax Residual CF Loan CashAfter Tax Payment rate before Tax Tax Saving After Tax Outflow 155,040 160,003 162,350 164,760
0 102,326 105,602 107,151 108,742
1 44,831 118,287 20.00% 143,000 (48,620) 114,498 102,326 105,602 107,151 108,742
2 37,414 129,524 32.00% 228,800 (77,792) 89,146 102,326 105,602 107,151 108,742
3 29,293 141,829 19.20% 137,280 (46,675) 124,447 102,326 105,602 107,151 108,742
4 20,400 155,303 11.52% 82,368 (28,005) 147,698 102,326 105,602 107,151 108,742
5 10,663 170,057 11.52% 82,368 (28,005) (67,199) 85,515
Sum 142,600 715,000 673,816 (229,097) (67,199) 561,303 511,632 528,010 535,755 543,708
NPV 469,273 454,717 469,273 476,156 483,225
Lease Cash OutflowYear
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Tax rate 34% Equity cost 715,000
Pre tax interest 9.50%
Lease payment 155,040
Lease Pay Tax Savings Forgone Resid. Initial Purch. Lease Paym.
After Tax Assc. with Deprc. Value After Tax Price Save - Incr. Cash Flow
0 (102,326) 715,000 612,6741 (102,326) (48,620) (150,946)
2 (102,326) (77,792) (180,118)
3 (102,326) (46,675) (149,002)
4 (102,326) (28,005) (130,332)
5 0 (28,005) (67,199) (95,204)
Sum (511,632) (229,097) (67,199) 715,000 (92,929)
IRR 5.32%
Lease payment 160,003
Lease Pay Tax Savings Forgone Resid. Initial Purch. Lease Paym.
After Tax Assc. with Deprc. Value After Tax Price Save - Incr. Cash Flow
0 (105,602) 715,000 609,398
1 (105,602) (48,620) (154,222)
2 (105,602) (77,792) (183,394)3 (105,602) (46,675) (152,277)
4 (105,602) (28,005) (133,607)
5 0 (28,005) (67,199) (95,204)
Sum (528,010) (229,097) (67,199) 715,000 (109,307)
IRR 6.27%
Lease payment 162,350
Lease Pay Tax Savings Forgone Resid. Initial Purch. Lease Paym.
After Tax Assc. with Deprc. Value After Tax Price Save - Incr. Cash Flow
0 (107,151) 715,000 607,849
1 (107,151) (48,620) (155,771)
2 (107,151) (77,792) (184,943)
3 (107,151) (46,675) (153,826)
4 (107,151) (28,005) (135,156)
5 0 (28,005) (67,199) (95,204)
Sum (535,755) (229,097) (67,199) 715,000 (117,052)
IRR 6.72%
Lease payment 164,760
Lease Pay Tax Savings Forgone Resid. Initial Purch. Lease Paym.
After Tax Assc. with Deprc. Value After Tax Price Save - Incr. Cash Flow
0 (108,742) 715,000 606,258
1 (108,742) (48,620) (157,362)
2 (108,742) (77,792) (186,534)
3 (108,742) (46,675) (155,417)
4 (108,742) (28,005) (136,747)
5 0 (28,005) (67,199) (95,204)
Sum (543,708) (229,097) (67,199) 715,000 (125,005)
IRR 7.19%
Year
Year
Year
Year
NPV over IRR over
buy & Borrow buy & Borrow
155,040 14,556.03 5.32%
160,003 0 6.27%
162,350 (6,883.48) 6.72%
164,760 (13,951.77) 7.19%
Leasing Payment
Pada lease payment$160.003
Leasing akan samapengaruhnya denganbuy & borrow
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A B C D
34.00% 34.00% 0.00% 0.00%9.50% 13.00% 9.50% 13.00%
6.27% 8.58% 9.50% 13.00%
$469,273 484,546 $663,800 $671,253
6.27% 8.58% 9.50% 13.00%
$155,040 $155,040 $155,040 $155,040$454,717 436,915 651,863 616,202
5.32% 5.32% 8.61% 8.61%$14,556 47,632 $11,937 $55,051
$469,273 $450,901 $672,730 $635,927
6.27% 6.27% 10.17% 10.17%$0 33,645 -8,930 $35,326
$476,156 $457,515 $682,598 $645,2556.72% 6.72% 10.91% 10.91%
-6,884 27,031 -18,798 $25,997
$483,225 $464,306 $692,730 $654,834
7.19% 7.19% 11.68% 11.68%
-13,952 20,240 -28,930 $16,419
Leasing option #4
NPV of lease
NPV of lease
IRR of lease
After-tax cost of
Pretax cost of debt
Eff.tax rate
Scenario
Leasing option #1
IRR of lease
Lease advantage over bor.&by
IRR of loan (borrow-and-buy)
NPV of loan (borrow-and-buy)
NPV of lease
IRR of lease
Lease advantage over bor.&by
IRR of lease
Lease advantage over bor.&by
Leasing option #2
Lease advantage over bor.&by
Leasing option #3
NPV of lease
Pada tax rate = 0, akanmemperbaiki posisileasing
Naiknya cost of debtmemperbaiki posisileasing
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A B C D34.00% 34.00% 0.00% 0.00%
9.50% 13.00% 9.50% 13.00%
6.27% 8.58% 9.50% 13.00%
$469,273 484,546 $663,800 $671,253
6.27% 8.58% 9.50% 13.00%
484,376 501,993 686,679 697,207
498,593 479,073 714,762 675,660
7.13% 7.13% 11.42% 11.42%
(14,218) 22,920 (28,082) 21,547
Honshu
438,036 458,436 624,641 $640,997
478,063 459,346 685,330 $647,839
7.13% 8.64% 13.48% 13.48%
(40,027) (911) -60,689 (6,842)
After-tax cost of debt
NPV of lease
NPV of lease
NPV of loan (borrow-and-buy)
IRR of lease
Lease advantage over borrowing
Faul haber Gmbh
NPV of loan (borrow-and-buy)
IRR of leaseLease advantage over borrowing
NPV of loan (borrow-and-buy)
IRR of loan (borrow-and-buy)
Scenario
Eff.tax rate
Pretax cost of debt
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Option I
9.50% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0%
40% 14,376 18,755 25,839 23,510 25,839 28,137 30,404 32,641
34% 14,556 18,684 25,514 23,271 25,514 27,723 29,899 32,043
25% 14,450 18,031 24,246 22,210 24,246 26,247 28,213 30,147
20% 14,202 17,398 23,161 21,276 23,161 25,011 26,827 28,610
15% 13,824 16,581 21,820 20,109 21,820 23,496 25,139 26,750
0% 11,937 13,090 16,367 15,304 16,367 17,402 18,409 19,390
Option II
9.50% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0%
40% 1,008 5,387 7,781 10,142 12,472 14,770 17,037 19,27434% (0) 4,128 6,439 8,715 10,958 13,167 15,343 17,487
25% (1,845) 1,736 3,844 5,915 7,951 9,952 11,919 13,852
20% (3,037) 159 2,117 4,037 5,922 7,772 9,588 11,371
15% (4,344) (1,586) 196 1,941 3,652 5,329 6,972 8,582
0% (8,930) (7,777) (6,655) (5,563) (4,500) (3,465) (2,458) (1,477)
Option III
Tax retax Interest
9.50% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0%
40% (5,313) 18,031 24,246 22,210 24,246 26,247 28,213 30,147
34% (6,884) (2,756) (445) 1,832 4,074 6,283 8,459 10,604
25% (9,551) (5,970) (3,862) (1,790) 245 2,246 4,213 6,14620% (11,189) (7,993) (6,036) (4,115) (2,230) (380) 1,436 3,219
15% (12,935) (10,178) (8,396) (6,650) (4,939) (3,263) (1,620) (9)
0% (18,798) (17,645) (16,522) (15,430) (14,368) (13,333) (12,325) (11,345)
Option IV
Tax retax Interest
9.50% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0%
40% (11,804) 159 2,117 4,037 5,922 7,772 9,588 11,371
34% (13,952) (9,824) (7,513) (5,236) (2,994) (785) 1,391 3,535
25% (17,464) (13,882) (11,775) (9,703) (7,667) (5,667) (3,700) (1,767)
20% (13,952) (9,824) (7,513) (5,236) (2,994) (785) 1,391 3,535
15% (21,757) (19,000) (17,218) (15,472) (13,761) (12,085) (10,442) (8,831)0% (28,930) (27,777) (26,655) (25,563) (24,500) (23,466) (22,458) (21,477)
Pretax InterestTax
TaxPretax Interest
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Option III vs Faulhaber
Tax retax Interest
9.50% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0%
40% 6,887 25,113 26,274 14,314 16,350 13,479 10,633 7,812
34% 7,334 5,940 2,804 (5,597) (3,355) (6,378) (9,365) (12,317)
25% 7,941 5,426 1,529 (8,140) (6,104) (9,842) (13,529) (17,166)
15% 8,536 4,599 (200) (11,286) (9,575) (14,154) (18,663) (23,102)
Option IV vs Faulhaber
Tax retax Interest
9.50% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0%
40% 396 (343) (3,004) (10,566) (8,237) (10,811) (13,356) (15,874)
34% 265 (1,128) (4,264) (12,665) (10,423) (13,447) (16,434) (19,385)
25% 29 (2,487) (6,384) (16,052) (14,017) (17,755) (21,442) (25,079)
15% (287) (4,223) (9,022) (20,108) (18,397) (22,976) (27,485) (31,924)
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Option III vs HonshuTax
9.50% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0%
40% 31,115 49,095 50,014 37,586 39,622 36,524 33,456 30,417
34% 33,143 31,448 28,017 19,045 21,287 17,987 14,730 11,514
25% 35,893 32,987 28,710 18,307 20,343 16,251 12,218 8,244
15% 38,565 34,134 28,854 16,844 18,555 13,532 8,591 3,730
Option IV vs Honshu
Tax
9.50% 10.0% 10.5% 11.0% 11.5% 12.0% 12.5% 13.0%
40% 24,624 23,639 20,737 12,706 15,035 12,235 9,467 6,731
34% 26,075 24,380 20,948 11,976 14,219 10,919 7,662 4,446
25% 27,980 25,075 20,797 10,394 12,430 8,338 4,306 331
15% 29,743 25,312 20,032 8,022 9,732 4,709 (231) (5,092)
Pretax Interest
Pretax Interest
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1. mmmnkpopoipo
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TERIMA KASIH