Feasibility Analysis of The Investment Project of Additional High Frequency Machinery in Increasing Production Capacity (Case Study of UD Berkah)

UD Berkah is a small business, that currently produces surface mats for adult slippers and children's slippers. Hot Embossing is one of a series of processes for making the surface of slippers. The Hot Embossing process requires a High Frequency machine to create a pattern on the printed slipper surface. Currently UD Berkah has 3 units of High Frequency machines to meet consumer demand. Due to the large number of requests, not all of them can be done by the company itself, so it requires the services of subcontractors to meet production shortages. Currently, the company plans to purchase High Frequency machines to overcome this problem. So it is necessary to analyze the feasibility of investment projects by considering several aspects with the Straight Line Depreciation method approach, Payback period, Net Present Value, Profitability Index and Internal Rate of Return. This is done to consider whether the investment in adding High Frequency machines is feasible or not for UD Berkah. Research results with an investment value of Rp. 55,000,000 with an economic life of 8 years, the results for a depreciation of Rp. 4,375,000 annually, the value of the declining balance in the final period is Rp. 2,678,492 NPV value of Rp. 399,700,855, the payback period for 8 months, the Profitability Index value is 8,27, the IRR value shows a result of 9.57%. So it can be concluded that the investment in purchasing high frequency machines is feasible.


INTRODUCTION
The economy after the Covid-19 pandemic began to show an increasing trend. The Covid-19 pandemic has caused many limitations in all aspects of life including a decrease in people's purchasing power which has affected the amount of production in large and small and medium scale industries.
Fulfilling increasingly diverse consumer demands has forced industry players to innovate [1].
Almost all industry players feel the demand, which has started to increase after the pandemic, one of which is the small industry in the field of footwear or slipper. Polymer and Sponge (Ethylene Vinyl Acetate) or what we know as EVA sponge are the main materials for making slipper [2]. Some of the production processes in producing slipper include the process of cutting materials according to shape and size, the process of printing on the surface of the slipper, the process of hot embossing or what is known as the process of stamping on the surface that has been printed, the joining of the top and bottom of the slippers by gluing and finishing processes. UD. Berkah is a type of trading business that sells manufactured goods, namely businesses that sell basic production materials to be made ready-to-sell finished goods. UD. Berkah is a Home Industry supplier of sandal components located on North Wedoro street number. 42, Subdistrict Waru, Sidoarjo, East Java. This company make products which is made according to consumer demand. Currently the company is producing the upper surface of children's slippers to be sent to consumers in Malang, East Java. In the production of the upper surface of the slippers, it requires an HF (High Frequency) machine to carry out the Hot Embossing process, which is the process of creating screen printing motifs on EVA sponge material. Currently the company has 3 HF Machine Units to meet consumer demand. The

115
working hours applied at UD. Berkah is 6 working days with normal working time of 10 hours and additional 2 hours of overtime.

Figure 2. Hot Embossing Process
The requests that are higher than the production capacity of HF machines causes companies to use subcontractor services to meet demand. This can be shown in the table below regarding the production capacity that can be achieved and the ability to fulfill it to consumers.

Table 1. Recap Production Capacity of UD. Berkah
The problem is that the company is not able to process all requests within the company so it uses the services of a subcontractor to work on the shortage of production requests. Requests that cannot be fulfilled independently will be carried out by subcontractors at a price of IDR 8,500/Kodi. While the cost to do it independently is only IDR. 5,740/Kodi. The cost of using subcontractors to meet demand adds to the burden of production costs for UD. Berkah. If the company is able to work on all production requests, it will cut costs more.
Business owners consider the benefits of using subcontractors to be very small and add to the company's expenses so that the company does not get the maximum profit from this production. The company seeks to increase production by increasing working days to 7 days in order to increase revenue by reducing the use of subcontractor services. However, this was not effective because when the experiment was conducted in December, the machine worked continuously. The machine experienced downtime and caused defects such as: Motives did not appear, Motives appeared uneven and wrinkled, and damage to several machine components. Maintenance policies need to be implemented to support smooth running. production activities due to production machines that have stopped due to damage [3].

Table 2. Damages to High Frequency Machine
The decision to add working days has an impact on machine damage and product defects.
Business owners wish to buy machines to increase production capacity. By purchasing a High Frequency machine, it can increase production capacity and enable lower production costs. The investment that must be spent to purchase a High Frequency machine is IDR. 55,000,000. The specifications of the machine are with a hydraulic press mechanism and the required electrical power consumption is at least 5000 watts.

Production
Production is the process of changing inputs that consist of physical and non-physical components. This increases the added value (added value) of the processed inputs. Added value can be considered from the perspective of functional added value and economic added value [4].

117
The relationships between inputs and outputs, as well as interactions between "processes" and other components, make up a production system. One of the many financial systems is a manufacturing system in the form of input, process and output, which are three types of production system components [5].

Cost
According to Giatman in a book entitled "Ekonomi Teknik" there are things that must be considered [6], namely as follows: 1. What is meant by cost here is all the sacrifices needed to achieve the goal whose measurement is carried out in currency values.
2. Cost, referred to as expenset generally because of its association with the amount of money that must be spent to make payments to get a desired result.
From the two things above, it can be concluded that cost has a far more complete and in-depth understanding than expenses. Whereas, Mulyadi defines costs in a broader sense "Cost is the sacrifice of economic resources measured in units of money, which has occurred or is likely to occur for a particular purpose" [7].

Interest
According to Giatman, interest is the money you earn from using money you previously borrowed. Interest forfeiture basically compensates for the depreciation of money over the life of the loan, with the amount of interest proportional to the depreciation of the money. Therefore, a person who earns interest on his money when the value of the money falls (inflation) does not profit economically from that money, and the value of the assets involved is relatively fixed and stable [6].

Interest of Rate
According to Giatman, The interest rate is the ratio between the interest charged per period of time and the amount of money borrowed at the beginning of the period multiplied by 100% [6], or :

Simple Interest
Simple interest is an interest calculation system based solely on the size of the original loan, and the previous period's interest paid does not include the interest multiplier factor. Interest calculation method can be done with a simple formula, Example: Mrs. Hanna borrowed money from her brother 4 years ago in the amount of IDR.200,000 with the obligation to pay interest at 5%/year using the simple interest method, the interest calculation is as follows.

Table 3. Simple Interest Calculation
The formula for a simple interest system can be calculated as follows: Example: If Mrs. Hanna has 7.5 million rupiah in savings at the bank for 8 months with an interest rate of 2.5%/month. How much interest does Mrs. Hanna get, if the interest system is simple? Answer:

Compound Interest
According to Giatman, The compound interest system is an interest calculation system in which interest is not only calculated on the amount of the initial loan, but calculations are based on the amount of debt at the beginning of the period in question, in other words interest is compounded. If the example above, Mrs. Hanna borrowed money from her brother 4 years ago in the amount of Rp. 200,000 with the obligation to pay interest at 5%/year using the compound interest method [6], the interest calculation is as follows:

Table 4. Compound Interest Calculation
It can be seen that the amount of interest that must be paid with a compound interest system will be greater than a simple interest system for the same loan. In current economic practice, the simple interest system is rarely applied, almost all national and international financial institutions/banks apply a compound interest system.

Investment
According to Pujawan, To increase the profit of creating goods and services available in the economy, investment is issued from the company's capital to buy capital goods and production equipment to increase its capacity in a business. In other words, investment is a spending activity that increases the output capability of an economy or company [8].
The need for investment is a capital requirement that will later be used in the operations of a business sector or a project. The term capital refers to resources in the form of money or goods that can be used to generate profit or profits [1]. The goal of investing is to reap future rewards, be it financial, nonfinancial, or both [8]

Investment Feasibility Analysis
Investment feasibility analysis is a research conducted on a project (generally an investment project) whether it can be implemented or not to determine the value of feasibility or success [9]. The understanding of this success can be seen from two sides, in a broader or more limited way. Success for the company, especially making a profit, is a more limited definition, while success outside the company's operations, such as success for society, such as absorbing labor is a more expansive thing [10].

Investment Analysis Steps
Measuring an investment requires a method of doing so to find out whether an investment is feasible or not. In making an assessment requires consideration of several aspects or certain considerations are necessary to decide the feasibility of an investment [11]. The following steps need to be taken for decision making: According to Pujawan, The payback period is the payback period calculated based on annual cash flow and residual value, which is basically the period (years) required to amortize (cover) the initial investment cost at a given rate of return [8]. To get a certain payback period, the following formula model is used: Where at is known as the cash flow that occurs in period t and ′ is the payback period to be calculated. If is the same from one period to another (uniform series), then the above equation can be expressed based on the P/A factor as follows: If an alternative has an economic useful life greater than the payback period ( ′) then the alternative is acceptable. Conversely, if ( ′) is greater than the estimated useful life of a tool or the age of an investment, then the investment or tool is not worth accepting because there will not be enough time to return the capital used as the initial cost of the investment. In practice, industry circles often calculate the value of N^' by ignoring the monetary value of time, or by assuming that i = 0%. With this assumption it will turn out to be: If the cash flow is in the form of a uniform series, then ( ′) can be obtained by the formula: Where at of this equation is a uniform cash flow series. Assuming i = 0%, this method has 2 weaknesses, namely: i. Ignore the concept of money value of time.
ii. All cash flows occurring after N^' are ignored.

b. Net Present Value
According to Pujawan, In this method all cash flows are converted to present value (P) and summed up so that the P obtained reflects the net value of all cash flows that occur during the planning horizon [8]. The interest rate used in this method is MARR.
Mathematically the present value of a cash flow can be expressed as follows: c. Internal Rate of Return According to Giatman, The IRR method is related to the level of cash flow ability to recover the investment and how many obligations must be fulfilled, which are explained in the form of a percentage/time period [6]. How to find IRR by using the following formula [12]:

d. Profitability Index
According to I Made Adnyana, The profit index method (Profitability Index/PI) is a technique that compares or uses the ratio between the initial investment of the project and the total value of the current cash flows during the project [13]. Initial outlay is excluded from the total present value of cash flows over the economic life, which only takes into account cash flows from the first year to the last year. The formula for finding the profitability index value is as follows [12]: The assessment criteria using the profitability index method to determine an investment are as follows: i. If the profitability index > than 1 then the investment will be accepted.
ii. If the profitability index is < than 1 then the investment will be rejected.

e. Depreciation Stright Line
According to Pujawan, The straight-line depreciation approach is based on the idea that the diminishing value of an asset is linear (proportional) with its time or age. Because of the simplicity of the calculations, this method is very popular [8]. The amount of depreciation each year using the SL method is calculated based on: Because assets are depreciated by the same amount each year, these assets are reduced by the amount of annual depreciation multiplied by t, or: The rate of depreciation, d, is the part of P-S that is depreciated each year. For the SL method, the depreciation rate is: 123

Net Profit
Company net profit data for a period of 5 years, starting from 2018 to 2022. Can be seen in the following table: Table 5. Net Profit UD Berkah

MARR
The MARR value is generally determined subjectively with a consideration of certain aspects of the investment. Where the considerations in question are: Other costs that must be incurred to obtain investment (Cc)

Investment risk factor (α)
= + + ± if and ± not yet or zero, so = (interest), and MAR≥ 1 Where: i = Bank's average loan interest rate Quarter 1 of 2023= 9,38% = Investment risk factor = 0% Then the MARR value obtained is equal to: + + = 9,38% + 0 + % = 9,38% The calculation results above show that the Minimum Attractive rate of Return or MARR is 9.38%. The MARR value above is used as a basic reference for evaluating and comparing with other alternatives.

Net Present Value
Determine the present value (p) adjusted for cash flow by adding up each period, then the cash value can reflect the net value of the entire cash flow in the coming period. So, NPV is the ratio of the difference between the present value of cash inflows and the present value of cash outflows over a certain period of time to test whether an investment made will generate profits in the future. Payback Payback Period results is 8 months and these results are shorter than the economic life of the machine, which is 8 years. From these results, the investment is declared feasible.

Profitability Index
The profitability index method basically calculates the ratio between the present value of net cash receipts in the future and the present value of the investment.
Profitability Index calculation is known the result is 8,27. Where the value is more than one. then the investment to purchase a High Frequency machine is acceptable or feasible.

Internal Rate of Return
Internal Rate of Return, which is a method for calculating the value of an investment that is used to determine the interest rate that equates the present value of expected cash flows in the future or cash receipts with the initial investment outlay. IRR is a formula to show what percentage of return on investment is made [14].  or it can be said to be greater than zero so that the investment is said to be profitable to realize. shows a yield of 9,57% and the result is greater than the minimum attractive rate of return of 9,38%.

ACKNOWLEDGEMENT
We would like to thank Mrs. Sri Handayani for her support and we also want to thank Mrs. Wiwin Widiasih for the fruitful discussion as well as her support and suggestions. Once again I thank my "For Palestine" association partners for their kindness and support. This research was conducted for the requirements of obtaining a bachelor's degree in industrial engineering at University of 17 Agustus 1945 Surabaya.