OPTIMAL CAPITAL STRUCTURE OF INDONESIAN AUTOMOTIVE AND COMPONENTS LISTED ON INDONESIAN STOCK EXCHANGE (IDX) USING DAMODARAN FRAMEWORK

• Main Author: rusli - 29116519, alghifari
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/25358
• Institution: Institut Teknologi Bandung

One important decision in every company's sustainability is the capital structure. With an optimal mix of long-term debt and equity, the company is expected to achieve maximum corporate value. Automotive companies and components play an important role in Indonesia's economic growth, by determining the optimal capital structure, automotive companies and components could achieve maximum company value and would be able to attract potential investors. <br /> <br /> <br /> To obtain an optimal capital structure, this thesis uses the Adjusting Present Value (APV) simulation approach by Aswath Damodaran. The simulation begins by estimating the companies unlevered value, then because the level of debt increases the value of the unlevered company which is adjusted to the net effect of both debt benefits and debt costs. By determining the optimal capital structure, automotive companies and components in Indonesia could have maximum company value, so that they can attract investors. <br /> <br /> <br /> In this simulation, the value of the company is estimated at every level of debt from 10% -90% and the debt ratio that produces the highest corporate value is the optimal debt ratio. The current debt ratio for automotive companies and components in Indonesia ranges from 17% -89% from 2012 to 2016. From the simulation results, it could be seen that there are five companies that must have a 0% debt ratio. The results could occur for a number of reasons such as negative company earnings, the company's earnings are lower than the interest that must be paid by the company. For other company, the results show an optimal debt ratio inaverage of 50%. <br />