The beta for coal mining companies was estimated to be 1.4, and the equity risk premium for projects in Indonesia was 8.8%.1 The most recent government benchmark interest rate was 7.5%. The Indonesian stock market performance, the Indonesian rupiah and U.S. dollar exchange rates, and the Indonesian inflation rates are presented in Exhibits 6, 7, and 8, respectively. The finance manager also prepared the cash flow forecasts for this investment based on the prevailing Indonesia corporate tax rate of 25%.

A. How attractive was this investment?

B. With the recent coal prices dropped to a level lower than those during the global financial crisis, do you think it is a good time to pursue expansion of coal mining?

C. Would Agus Halim be able to get the green light from the parent firm to pursue it?

D. Would the bankers grant the $12 million term loan for this acquisition?

Exhibit 6: Indonesian Stock Market (JCI) Performance, 1998 to November 2015. JAKARTA COMPOSITE 5500 4400 3300 2200 1100 LLLL 1998 2002 2006 2010 2014 Source: Trading Economics (http://www.tradingeconomics.com/indonesia/stock-market). Exhibit 7. Exchange Rates (Indonesian rupiah per US$) from January 1, 2011-November 1, 2015. 15,000.0 14,000.0 13,000.0 12,000.0 11,000.0 10,000.0 9.000.00 8,000.00 Jan 1, 2011 Jan 1, 2012 Source: Oanda Historical Exchange Rates. Jan 1, 2013 Jan 1, 2014 Jan 1, 2015 Exhibit 8a. Historical Inflation Rates in Indonesia 2016 2014 2012 2010 2008 2006 re: www.tradingeconomics.com; Statistics Indonesia. Exhibit 8b. Inflation Rates in Indonesia in 2015 8.36 7.15 7.26 7.267 48 6.96 6.79 ... 6.83 6.29. 6.38 6.25 4.89 Jan 2015 Apr 2015 Jul 2015 Oct 2015 Source: www.tradingeconomics.com; Statistics Indonesia. Exhibit 6: Indonesian Stock Market (JCI) Performance, 1998 to November 2015. JAKARTA COMPOSITE 5500 4400 3300 2200 1100 LLLL 1998 2002 2006 2010 2014 Source: Trading Economics (http://www.tradingeconomics.com/indonesia/stock-market). Exhibit 7. Exchange Rates (Indonesian rupiah per US$) from January 1, 2011-November 1, 2015. 15,000.0 14,000.0 13,000.0 12,000.0 11,000.0 10,000.0 9.000.00 8,000.00 Jan 1, 2011 Jan 1, 2012 Source: Oanda Historical Exchange Rates. Jan 1, 2013 Jan 1, 2014 Jan 1, 2015 Exhibit 8a. Historical Inflation Rates in Indonesia 2016 2014 2012 2010 2008 2006 re: www.tradingeconomics.com; Statistics Indonesia. Exhibit 8b. Inflation Rates in Indonesia in 2015 8.36 7.15 7.26 7.267 48 6.96 6.79 ... 6.83 6.29. 6.38 6.25 4.89 Jan 2015 Apr 2015 Jul 2015 Oct 2015 Source: www.tradingeconomics.com; Statistics Indonesia