ABSTRACT : In 2022 Indonesian government released new regulation that doubled the royalty tariff, while global political conditions led to a surge in oil prices. To assess the economic situation, the company used discounted cash flow method using the weighted average cost of capital to determine its firm value. However, the terminal value was not considered because the operation will end in line with the termination date of license, the assets would be returned to the government. The result shown declining in the firm present value from USD 43.7 million to USD 21.8 million. If the royalty tariff remained at 3%, the firm value would increase to USD 31.3 million, as the company wouldn’t need to decrease the stripping ratio, and coal sales would continue as planned. Sensitivity analysis was conducted, considering factors such as production cost and operating expenses, with variations of ±20% from current assumptions. From the analysis, production cost was the most significant factor. To increase the firm’s value from USD 21.8 million to USD 31.3 million, the company need to request an exemption the increase in royalty tariff, negotiate lower fuel prices with suppliers, and negotiate with customer to add fuel price adjustment in determining the sales price
KEYWORDS – Discounted cash flow, valuation, coal mining, royalty tariff