UNIVERSITAS INDONESIA

FACULTY OF ECONOMICS AND BUSINESS

DEPARTMENT OF MANAGEMENT
INTERNATIONAL UNDERGRADUATE PROGRAM

ONLINE FINAL EXAMINATION

ODD SEMESTER 2021/2022
CORPORATE FINANCE

Lecturer : Lecturer Team

Type of Exam : Open Book
Day/Date : Wednesday, December 22nd, 2021
Time : 150 minutes (13:00 – 15:30 WIB)

Exam Instruction

General Guideline:

1. Submit the Academic Honesty Statement (attached) together with the answers.
2. Make sure that the internet connection is stable to ensure that answers are sent via EMAS/email.
3. The working time is 150 minutes (13:00 – 15.30 WIB) with an additional 15 minutes for sending
answers via EMAS/EMAS2/email (files should be submitted no later than 15:45 WIB). Overdue
in submitting the answer will result in score penalty and even disqualification.
4. Answers among students with significant similarities, as well as other indications of cheating, will
not be marked and subsequently processed in accordance to the applicable regulation at FEB UI

Special Guideline:

1. Start with praying.

2. Write the answer in a handwritten format (make sure it can be read) either in a lined folio paper
or A4 HVS.
3. The first page of the answer sheet must contain the exam article (Name, Student Number, Subject,
Name of Lecturer, Exam Date).
4. The eight and tenth digit of your student number will be the X and Y values in the exam.
Example: NPM 2006144185; then the value of X = 1 and Y = 5
5. Write the value of X and Y on each page in the upper left corner of your answer sheet.
6. After finishing working on the question, take a photo/scan the statement of honesty and the results
of your work into a PDF in one unit and send it via EMAS/email.
7. The file name and email subject are as follows: UAS_Student Name_Student Number_Course
Title_Class Code. (Example: UAS_Rezalfatih Maulid _2006144185_CF_KKI A)
8. Make sure your file is submitted/has been sent correctly through EMAS/EMAS2/email. (Check
the sent folder)
9. Do not forget to save the proof of submission in the form of screenshot in EMAS/email
PROBLEM 1 (20%)

You are evaluating a new product launched in Singapore that costs $896.000. It has an eight-
year life and has no salvage value. By assuming the depreciation is straight-line to zero over
the life of the project, you project that the sales will be at 100,000 units per year. Based on your
estimation, the price per unit is $40, variable cost per unit is $25, fixed costs are $900,000, and
tax rate is 35%. The required return on this project is 15%.

a. Calculate the accounting break-even point. What is the degree of operating leverage at
the accounting break-even point?
b. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes
in the sales figure? Explain what your answer tells you about a 5000 unit decrease or
increase in the projected sales.

PROBLEM 2 (20%)

Santi owns stocks A and B in her portfolio. Stock A does not pay dividends, but stock B does,
on a regular basis. The following are the prices of stock A and B during the previous five year:

Stocks Price Year

(Rp)
2017 2018 2019 2020 2021

Stock A Price 600 730 710 840 940

Stock B Price 750 750 750 750 750

Stock B’s dividends during 2018-2021 are as follows, respectively ; 60, 80, 100, and 120 (in
Rupiah).

a. Calculate the arithmetic average return for the period 2018 to 2021. (Hint: Rupiah return
to Percentage Return).
b. In the future, the probability of recession is 35%, normal is 40%, and boom is 25%. The
expected returns under the recession and boom circumstances are 4% lower and 4%
higher than the normal condition, respectively. Santi in 2021 invested Rp50 million in
Stock A and Rp70 million in Stock B. Calculate the expected return and standard
deviation for Stock A and B and the expected return of the portfolio.
PROBLEM 3 (20%)

Jangga Corp. is a publicly-listed food and beverage company that has been operating for
more than 20 years. It is currently considering to open a new branch in South Jakarta, and
as a business analyst, you are asked to conduct a feasibility study of this business plan.
One of your main tasks is to calculate the weighted average cost of capital (WACC) that
will be used for the capital budgeting analysis for this project, which has a similar level
of risk with the overall company.

Based on the available data, currently the risk-free rate is 4.X%, and the market risk
premium is 12%. The company’s beta is 1.Y. The last closing price per share is IDR
7,500, and there is a total of 12,000,000 shares outstanding. The company’s debt consists
of bond that is quoted 110%, with a par value of IDR 100,000,000 and time to maturity
of 12 years. The number of total bond outstanding is 500. The coupon rate is 10% p.a.,
and the coupon is paid semi-annually. Company’s tax rate is 25%.

Based on the information above:

a. Calculate the company’s cost of equity

b. Calculate the cost of debt
c. Calculate the total market value of equity and debt
d. Calculate the company’s weighted average cost of capital.

*Notes on using X dan Y for question number 3:

For example, for the equation 4.X%, if your X value is 1, then the X on the equation value will
be substituted by your X value to a value of 4.1%. For 1.Y, if your Y value is 5, then it will be
1.5

PROBLEM 4 (20%)

PT OKE has projected sales (in million rupiah) for the next four quarters as follows:

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Quarter 1*

820 790 880 1000 1000*(1+XY%)

Receivables at the beginning of this year was Rp 300 million. PT OKE has an average
collection period of 45 days. PT OKE's purchases from suppliers on a quarterly basis are 50%
of the estimated sales for the next quarter, and the average account payable period is 36 days.
Salaries, taxes, and other expenses for each quarter are 30% of sales. Dividend is Rp 20 million
paid quarterly. PT OKE plans capital expenditure in the second quarter of Rp 300 million. The
company has an initial cash balance of Rp 190 million with a minimum balance of Rp 190
million. Assume that the company must borrow the funds needed in the short term at an interest
rate of 5% per quarter and interest is paid in the following quarter. Companies can also invest
excess funds in short-term marketable securities at a rate of 4% per quarter and paid in the
following quarter

Prepare a short term financial planning for PT OKE! (Assuming 1 quarter = 90 days)

*Notes on using X dan Y for question number 4:

For example, for the equation (1+XY%). If your X value is 1, and your Y value is 5, then the X
and Y on the equation will be substituted by your X and Y values to a value of (1+15%)

PROBLEM 5

5A (10%)

PT. Serendipity is a company that produces shoes and currently applies a cash-only sales
policy. In this new year's holiday season, the company is considering changing its cash-only
sales policy to a net 45-day credit. The new credit policy is expected to increase sales from
1200 units per month to 1350 units per month. The current selling price per unit and variable
cost per unit are IDR 175.000 and IDR 100.000, respectively. However, if the product is sold
on credit, the selling price per unit and the variable cost per unit will remain constant. The
required return is 3% per month.

Based on the above information, calculate the NPV of the new credit policy! Should PT.
Serendipity change its sales policy?

5B (10%)

PT Luigi Guido is an Italian automotive repair company located in America. The company has
an inventory policy to purchase 9000 units of car tires for its annual requirements by ordering
regularly every month. Each unit of tire costs ($20+X). The ordering cost per order is ($15+Y)
and the carrying cost per unit is 15% of the price of each unit of tire. You as a manager are
assigned to suggest a more economical inventory policy for the company by providing advice
on a new inventory policy. Assume 1 year = 12 months = 52 weeks.

1. How many tires should the company buy for each order? What are the total carrying
costs and total ordering costs per year for the company's current inventory policy?
2. How many tires should be purchased for each order (EOQ) in order to achieve an
optimal inventory policy? With this optimal policy, how many times must the company
place an order in a year? What are the total carrying costs and total ordering costs per
year for the company's new inventory policy?
3. How much money can PT Luigi Guido save per year by implementing a new more
optimal inventory policy?

Based on the above information, calculate the NPV of the new credit policy! Should PT.
Serendipity change its sales policy?

*Notes on using X dan Y for question number 4:

For example, if there is an equation value of ($20+X) and ($15+Y). If your X value is 1, then the
X on the equation value will be substituted by your X value to a value of ($20+1) = $21. And for
($15+Y), if your Y value is 5, then it will be ($15+5) = $20.
 STATEMENT OF ACADEMIC HONESTY

For this Corporate Finance exam, hereby, I:

Name :

Student Number :

make the following truthful statements:

1. I do not receive and/or provide assistance in any form to other students in doing exam
questions.
2. I do not plagiarize other people's work and acknowledge it as my work.
3. I understand that any act of cheating will be punished according to the academic rules
that apply at the Faculty of Economics and Business Universitas Indonesia.

Depok, December 22nd 2021

(Full name)