Investment feasibility and risk management of a small-scale layer business in the Province of North Sulawesi, Indonesia

The main expectation of investment in the layers production is to provide benefit for small-scale farmers, who have limited capital and deal with varied business risks. The purpose of this research is to know the feasibility of financial investment and determine an alternative scenario in dealing with risk for farmers in the small-scale egg-layer business with limited capital. The research, then, employed a survey method with a multi-stages sampling technique on 85 farmers of the small-scale layer business located in the District of Tomohon Utara. The City of Tomohon as the center of layers population in the Province of North Sulawesi. Data collection used a list of questions related to the research problem. Further, the use of financial analysis was by criteria of investment feasibility with the measurement of net present value, cost ratio of benefit, internal rate of return, and followed by sensitivity analysis related to business risk. The results of this research demonstrate that the total rate of layer chickens raised by farmers was 2,136 birds and the net present value (NPV) was IDR  36,213,611. Within the five-year investment, the cost ratio of benefit (B/C) was 1.05, and the internal rate of return (IRR) was 22.85 %. Under the current management of a small-scale layer business, performed by farmers, the layers business was feasible to deal with the risk of increasing feed price, increased mortality, and declining egg price, which those factors caused loss for farmers. Therefore, based on the sensitivity analysis, the small-scale farmers had to improve their daily rate of production of eggs by 76%, when the feed price increased by 5%, or the egg price declined by 5%, in minimizing and preventing loss.