Proposed Capital Budgeting: Should PT.FST Close its Kelambu Division?

In 2021, the manufacturing industry is Indonesia’s most significant contributor to its Gross Domestic Product (GDP). Within industry, there a sub-industry called textile industry. The in Indonesia highly fragmented. For instance, are three niche markets: for households, clothing, and agriculture. segments have different growth of 4%, 7.5%, 5%, respectively, this difference rate will create dilemma companies. companies must decide which segment needed be perused or avoid since each opportunities threats. PT. FST also faces dilemma. differences segment’s reflected by company’s sales product. plastic products Waring Benang rates 34% 52% five years CAGR, respectively. Those substantial compared Kelambu with only 23% CAGR. From there, owner CEO see shift sold, from products. To capture shifts demand within market, he decided close division make company leaner able focus resources on that generate revenue most. capital budgeting analysis, plan shutting down result faster payback period 7.2 8 regular cash flow 8.05 8.12 discounted flows. More importantly, it generates higher NPV IDR 1,087 bio than 976 bio. addition, has Profitability Index IRR 6.04 25% 5.01 22%. risk expected value project’s 1,457 bio, probability less zero 8%. Lastly, final project contributes literature providing an alternative framework how use techniques compare two expansion plans closing divisions company. Moreover, other players, especially SMEs could refer if they face similar