Decision Making on Project Feasibility using Capital Budgeting Model and Sensitivity Analysis. Case Study: Development Solar PV Power Plant Project

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Gafli, Gusti Fauzi Maulana and Daryanto, Wiwiek Mardawiyah (2019) Decision Making on Project Feasibility using Capital Budgeting Model and Sensitivity Analysis. Case Study: Development Solar PV Power Plant Project. International Journal of Business, Economics and Law, 19 (1). pp. 50-58. ISSN 2289-1552

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This study explore the practice of Capital Budgeting using elements such as: Payback Period, Discounted Payback Period, Return on Investment (ROI), Net Present Value (NPV), NPV Index, Internal Rate of Return (IRR) to provide the analysis required by company for deciding whether a project offered is feasible(or not) to be executed. It is a formal process used for evaluating potential investments that are significant in amount. It is a tool for maximizing a company’s future profits since most companies are able to manage only a limited number of large projects at any one time. (EduPristine, 2015). The project used in this paper as case study, is a project for building a Twenty Mega Watt (20 MW) Photovoltaic Power Plant (PV Power Plant) for one of the Independent Power Provider in Eastern Area of Indonesia. The questions the company would like to answer is, can Capital Budgeting approach assist them in deciding whether project is feasible to be executed and how far the CAPEX can be stretched if the company still want to meet the target tariff set by the project owner (USD 0.70 / kwh). Using Capital Budgeting approach, author able to show that with the estimated investment of USD 17 Million, the project is feasible to be executed only if the right technology mix is selected. Detail results were discussed and presented in conclusion. Keywords: Decision making, Capital budgeting model, net present value, internal rate of returns, project feasibility, Solar, PV

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
T Technology > TD Environmental technology. Sanitary engineering
Divisions: Research And Community Empowerment > Journals
Depositing User: Rizky Amalia
Date Deposited: 27 Jan 2020 07:18
Last Modified: 19 Feb 2021 04:53

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