OPTIMAL CAPITAL STRUCTURE ANALYSIS OF PT. MIDI UTAMA INDONESIA TBK.

• Main Author: Metaforma Ma'rifat, Exactly
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/76089
• Institution: Institut Teknologi Bandung

Retail industry has faced great challenges in doing business in the pandemi era. Pemberlakuan Pembatasan Kegiatan Masyarakat ( PPKM ) regulated by the Government of Indonesia that trammell and forbid the mobilization of people affects on the fall of amount of sales of the retail industry overall that reached 20% in April 2020. After the end of the PPKM regulation by December of 2022, Indonesia Retail Entrepreneur Association (APRINDO) believes that retail industry growth can increase to 3% growth in 2023. PT. Midi Utama Indonesia Tbk, as one of a retail company, through its public expose in May 2023 stated that it was prepared to issue capital expenditure of IDR 1.6 trillion to expand its business. Based on its financial report of 2022, the company has a debt to equity ratio of 1.58. On the other hand, the average industry’s debt to equity ratio is 2.45. The company’s current capital structure consists of 61% of debt and 39% of equity that resulted in weighted average cost of capital at 8.65%. With the additional capital plan and difference of number in debt to equity ratio, leads to a question about the company’s optimal capital structure also the proportion of capital needed to come up with the additional capital. Using the cost of capital approach, the writer come up with the company’s optimal capital structure consisting of 64% on debt and 36% on equity with a weighted average cost of capital at 8.626%. To come up with the additional capital, the company should get IDR 1,095,874,488,263.04 on debt and IDR 504,125,511,737.96 on equity.