Optimal Capital Structure of PT Adhi Karya (Persero) Tbk

Authors

  • Fania Salsabila
  • Mandra Lazuardi Kitri

Abstract

PT Adhi Karya Tbk proposed additional equity to the government in the form of Penyertaan Modal Negara (PMN) for 1.98 trillion IDR and plans to issue rights for 1.89 trillion IDR. However, the current capital structure of the firm consists of 40% debt and 60% equity while the construction industry’s average is 57% and 43% respectively. Meaning, if the firm receives the additional equity, its capital structure will deviate from the industry. Based on the problem, it has to be analyzed whether the additional equity for PT Adhi Karya Tbk is aligned with its optimal capital structure. Therefore, the firm can have the lowest cost of capital and maximize the firm’s value. For the methodology, this research uses capital asset pricing model, Damodaran (2015) cost of debt model, and weighted average cost of capital. Based on the data analysis, the optimal capital structure of PT Adhi Karya Tbk consists of 27% long-term debt and 73% equity with cost of capital 14.526%. The firm has to decrease its additional equity and increase debt by issuing bonds or bank loans.

Keywords: Adhi Karya, Industry Average, Optimal Capital Structure

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Published

2023-10-09