Company Background: PT Nusantara Tbk$.$ is a leading Indonesian manufacturing company specializing in consumer electronics. Founded in $1995,$ the company has grown to become a major player in the Southeast Asian market, known for its innovation and quality products. The company is listed on the Indonesia Stock Exchange $($IDX$)$ and has a diverse shareholder base.

Part $1$: Cost of Capital Scenario

PT Nusantara Tbk$.$ is planning to expand its production capacity by building a new factory in Surabaya. To finance this project, the company needs to determine its cost of capital. The company has the following financial information:

$$ Equity: The company has $10$ million shares outstanding, currently trading at IDR $5,000$ per share. The expected return on equity is $12\%.$

$$ Debt: The company has IDR $100$ billion in long$-$term debt, with an average interest rate of $8\%.$ The debt is currently trading at par.

$$ Tax Rate: The corporate tax rate in Indonesia is $22\%.$

Question:

$1.$ Calculate the market value of equity and debt.

$2.$ Calculate the company's weighted average cost of capital $($WACC$).$

Part $2$: Capital Budgeting Scenario

The new factory project in Surabaya is estimated to cost IDR $150$ billion. The project is expected to generate the following cash flows over its $5-$year life:

$$ Year $1$: IDR $30$ billion

$$ Year $2$: IDR $40$ billion

$$ Year $3$: IDR $50$ billion

$$ Year $4$: IDR $60$ billion

$$ Year $5$: IDR $70$ billion

The company's WACC, calculated from Part $1,$ will be used as the discount rate.

Questions:

$1.$ Calculate the Net Present Value $($NPV$)$ of the project.

$2.$ Calculate the Internal Rate of Return $($IRR$)$ of the project.

$3.$ Should the company proceed with the project based on NPV and IRR criteria?

Part $3$: Cash Flow Estimation Scenario

In addition to the new factory, PT Nusantara Tbk$.$ is considering launching a new product line. The project will require an initial investment of IDR $50$ billion and is expected to generate the following cash flows:

$$ Year $1$: IDR $10$ billion

$$ Year $2$: IDR $15$ billion

$$ Year $3$: IDR $20$ billion

$$ Year $4$: IDR $25$ billion

$$ Year $5$: IDR $30$ billion

Questions:

$1.$ Estimate the free cash flows for each year

$2.$ Using the WACC from Part $1,$ calculate the NPV of the new product line.

$3.$ Should the company proceed with the new product line?

Part $4$: Capital Structure Scenario

PT Nusantara Tbk$.$ is evaluating its capital structure to determine if it is optimal. Currently, the company's debt$-$to$-$equity ratio is $1$:$1.$ The company is considering increasing its debt to finance future growth.

Questions:

$1.$ Discuss the trade$-$offs between using debt and equity financing.

$2.$ What are the potential risks and benefits of increasing the company's leverage?

Part $5$: Distribution to Shareholders Scenario

PT Nusantara Tbk$.$ has generated significant profits over the past few years and is considering increasing its dividend payout. The company has traditionally paid a dividend of IDR $200$ per share, but the management is contemplating a special dividend or a share buyback program.

Questions:

$1.$ Discuss the advantages and disadvantages of paying dividends versus repurchasing shares

$2.$ What factors should the company consider when deciding between a special dividend and a share buyback?

$3.$ Provide recommendations on the best course of action for PT Nusantara Tbk$.$