Dear Mr./Mrs, please help me regarding these case below, thank you :

XYZ is a well-known diesel generator from Japan used for housing which has been in operations for five years in Indonesia. Mr. Toshihiro Tanaka CEO of XYZ is now considering expanding market segment not only for housing but also for industries for such as Water Purification, Hotel, Agro Industry, Restaurant, Oil & Gas Industry, and Mining.

Currently, XYZ has only one office in Jakarta. In order to expand and penetrate the market in Indonesia, Mr. Toshihiro plans to open several new branches out site Jakarta in year 2020.

XYZ representative office operated in Indonesia as a sole agent of XYZ started in year 2000. Subsequently, XYZ established a local company under Indonesian Corporate Law called PT. Genset XYZ (PGXYZ) in December 2017 with paid-in capital/preferred stock issued 300,000 shares at amount of Rp300,000,000,-. Subsequently PGXYZ was registered as public listed company in November 2020 by issuing new stock/common stock 2,500,000 shares as equal to 25% of total common shares and company obtained new funds total Rp3,000,000,000 where Mr. Toshihiro will develop a new business unit called EPCI (Engineering, Procurement, Construction, Installation) focused on water purifying and waste water treatment for industry.

Based on companys financial performance, Mr. Toshihiro concluded that Indonesia has a big potential market in water treatment and purifying business. However, he still did not have a confidence on his conclusion just based on company performance. Mr. Toshihiro requests that BBVA Consultant Firm to make proposal in order to know how much new additional working capital required supporting companys business plan for year 2022.

There are diesel generator sales forecasting in several cities and diesel generator requirement from industry as shown at Exhibit 3 and Mr. Toshihiro plans to set up an Engineering Services Office will be located at several city which ever are feasible.

Mr. Toshihiro estimates that the cost of office start-up for each branch office:

Purchase of building estimated : Rp3,000,000,000 Rp5,000,000,000

Renting the Office estimated : Rp200,000,000/year Rp400,000,000/year

Office furniture estimated : Rp50,000,000 100,000,000

In addition, Mr. Toshihiro need funds for investment roughly Rp35 billion. He also expected that yearly operating costs of the new branch office will be almost identical to the office in Jakarta. Mr. Toshihiro was requested to submit a proposal to head office XYZ at Tokyo, Japan however the President Director of XYZ Japan suggests that Mr. Toshihiro shall obtain capital from Indonesia capital market by issuing bonds and/or selling shares for second IPO or borrowing form Indonesian banks as long as the cost of capital is the lowest for company.

An office operation expense consists of staff salaries (manager, salesman, mechanic and administration staffs), inclusive of all overhead costs is estimated Rp500,000,000 per month and main raw materials for inventory consists of:

Cable.

Generator spare parts

Electrical hardware

Currently, Bank lending interest rate offered in range: 7.0% - 9.0%/annum. Yield on Indonesian Government Bond (SUN) average 8%/annum for tenor 15 years. Currently, company shares traded at high price Rp1,500/share.

Financial Position Statement of PT.GXYZ Indonesia as shown at Exhibit 1 and 2. You are requested to make recommendation which cities are the best for investment and how to finance its project office expansion.

Question Summary :

1. How much new additional working capital required supporting companys business plan for year 2022..?

2. Make recommendation which cities are the best for investment and how to finance its project office expansion..?

Exhibit 1 FINANCIAL POSITION AUDITED Exhibit 2 INCOME STATEMENT AUDITED Exhibit 3 Sales Forecast Exhibit 1 FINANCIAL POSITION AUDITED Exhibit 2 INCOME STATEMENT AUDITED Exhibit 3 Sales Forecast