ASSESSING THE ADDED VALUE OF INVESTMENT PROJECT AND DEFINING FINANCING STRATEGY OF PT PRAKARSA ENVIRO INDONESIA

• Main Author: Kurniawan, Evan
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/22007
• Institution: Institut Teknologi Bandung

Water and Wastewater treatment services market in Southeast Asia is at the beginning of the growing stage with several developments that exist across the countries in the region. PT Prakarsa Enviro Indonesia is one of the companies that run its business in water and wastewater treatment industry in Indonesia. The revenue of PT. Prakarsa Enviro Indonesia is on a declining trend in year 2011-2015. In order to overcome this situation, The Company came up with a strategic plan to provide clean water for Indonesian society by investing on new government project. To invest on the government project, Company needs to collect IDR 3 Trillion to fund the investment plan and decided to finance it using a proportion of 30% equity and 70% debt This research aims to help PT. Prakarsa Enviro Indonesia shareholders to assess whether the company’s investment plan will give added value and also to determine the number and price of new shares that should be issued in order to finance the investment plan through equity financing an this research used valuation as the tool to value PT Prakarsa Enviro Indonesia, discounted-cash flow model as the calculation method and free cash flow to the firm to calculate the cashflow in DCF. The result reveals that the equity value of PT Prakarsa Enviro Indonesia after investment increase from IDR 59,150,834,162 to IDR 3,332,204,187,265 and the share price of the company after investment fall within IDR 237,135.46 to IDR 305,315.89, which increase from the price per share before investment that equal to IDR 9,464.13. The number of new shares should be issued by the company is affected by the price per share that the company decides. if the company decides to sell with minimum price of IDR 237,135.46, the number of new shares should be issued are 6,004,909 shares and if the company decides to sell with maximum price of IDR 305,315.89, the number of new shares should be Issued are 4,663,946 shares. Both decision will eventually result on the changes in current shareholders ownership within range of 57.27% to 51%. Based on the result, PT Prakarsa Enviro Indonesia should invest on the new government project since it will increase the value of the company and share price without making the current shareholders lost its majority of ownership.