Optimal Capital Structure for Indonesian State-Owned Electricity Company

Marita Putri Nirbaya, Ahmad Danu Prasetyo

2019

Abstract

Electricity is important in our lives since it is crucial for our basic needs. Along with the inclining population numbers each year, the demand for the electricity also inclining. However, electricity business needs huge amount of investments since the plant and the operational cost are not cheap. There are several funding sources that are possible, it could be inside or outside Indonesia. included as capital-intensive business, business in electricity sector needs massive investments. The source of the funding may vary, it could be from outside or inside Indonesia. In Indonesia, the company that appointed by the government to generate, transmit and distribute electricity is PT PLN Persero. The company itself needs to know their combination of the debt and equity that could generate maximum value of the company or it is known as its optimal capital structure. The theory that is based in this research is the theory from Gitman and Zutter (2015) that said that to maximize firm value we need to maximize the firm’s weighted average cost of capital (WACC). From the calculation of the model used in this research, it is obtained weight combination of 20% domestic cost of equity, 39.66% domestic cost of debt and 40.34% global cost of debt.

Paper Citation

in Harvard Style

Nirbaya M. and Prasetyo A. (2019). Optimal Capital Structure for Indonesian State-Owned Electricity Company.In Proceedings of the 2nd International Conference on Inclusive Business in the Changing World - Volume 1: ICIB, ISBN 978-989-758-408-4, pages 729-737. DOI: 10.5220/0008436007290737

in Bibtex Style

@conference{icib19,
author={Marita Putri Nirbaya and Ahmad Danu Prasetyo},
title={Optimal Capital Structure for Indonesian State-Owned Electricity Company},
booktitle={Proceedings of the 2nd International Conference on Inclusive Business in the Changing World - Volume 1: ICIB,},
year={2019},
pages={729-737},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0008436007290737},
isbn={978-989-758-408-4},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 2nd International Conference on Inclusive Business in the Changing World - Volume 1: ICIB,
TI - Optimal Capital Structure for Indonesian State-Owned Electricity Company
SN - 978-989-758-408-4
AU - Nirbaya M.
AU - Prasetyo A.
PY - 2019
SP - 729
EP - 737
DO - 10.5220/0008436007290737