Investment Project Analysis of a Medium Range (MR) Tanker Ships Purchase in an Attempt to Maintain the Economic Productivity of the Company (Case Study: PT XYZ)

Abstract

PT. XYZ is a spin-off charter out business of its host company that specifically focuses on providing charter out services in the shipping industry. This research was carried out in response to the requirement to rejuvenate the vessels owned by PT XYZ taking into consideration the age of the ships. In total, there will be 7 ships that was used as an object of this research, considering the replacement program options of either acquiring newbuild vessels or secondhand ships. Newbuild Ship investment will use a 9.09% hurdle rate, including the weighted average cost of capital (WACC) of 7.09% and a risk premium of 2% in the analysis. This hurdle rate will be used as comparative data to the required rate of return for the related project (IRR>Hurdle Rate). There is a total of 2 ship in the overall project that will be replaced with a newbuild ship, Project 1 and Project 2. These investment projects will be conducted from 2024-2026 period. The capital structure for newbuild projects consisted of 75% debt and 25% equity. Secondhand ship investment will use an 9.59% hurdle rate, including the weighted average cost of capital (WACC) of 7.09% and a risk premium of 2.5% in the analysis. There is a total of 5 ships in the overall project that will be replaced with secondhand ship, Project 3-7. These investment projects will be conducted from 2024-2026 period. The capital structure for secondhand projects consisted of 75% debt and 25% equity. Based on the financial assessments of the projects, the findings consistently demonstrate positive results. As a result, it can be inferred that the seven projects are both viable and feasible to undertake. The primary objective is to guarantee that these projects make a positive contribution to the company’s economic productivity.