There is a firm located in Medan called PT Super Sekali. The following executive meeting provides all information regarding the plan of a business expansion. The accounting and finance department notes that the firm shall purchase immediately for the land where the expansion is going to be operated. The land costs Rp 200.000.000.000,-. The building costs Rp 400.000.000.000,- For the building costs, the firm estimates that 30 percent will incur immediately, another 50 percent will incur next year, and the remaining will incur in the next two years. The expansion cannot be executed until the building is complete. Therefore, the firm expects that the mall will be able to operate starting from the third year. The firm also documents that the building is depreciable for the next 10 years by the straight-line method. Her team also informs that the operating expenses (excluding depreciation) are expected to be steady at around 15 percent of revenues. The firm shall also invest Rp 20.000.000.000,- additional working capital and expect to recover Rp 12.000.000.000,- when the operation is closed. The firms marginal tax rate is 30 percent, and the appropriate nominal discount rate is 13 percent. Recent annual inflation in Medan province is 8 percent. The firm forecasts that it can expect to sell 700,000 packages with an average selling price Rp 400.000,- per package. The firm also reasonably expects that the firm can charge an increase in the selling price of 10 percent per annum with an annual 5 percent increment additional package being sold every year. Last, the meeting concludes that the operation shall be closed after five years of operation because its competitive edge will be fade away.

Required: a) Evaluate whether PT Super Sekali shall execute the expansion plan! Your analysis must refer to capital budgeting techniques. Please write reasonable assumptions and reasons in your calculations. (35 points) b) After hearing the responses in part a), an executive informs that the land can be re-resold when the operation is closed later on. The executive also mentions that the firm can reasonably expect a 2 percent annual incremental land price, 1 percent selling costs, and marginal tax rate applied only to the gain portion of selling the land. Explain how this information might update your analysis in part a)! (15 points)