DETERMINING THE OPTIMAL CAPITAL STRUCTURE OF PT BALI TOWERINDO SENTRA

The increasing number of smartphone user, wider penetration of internet using a mobile device and mobile data consumption lead to rapid growth in the telecommunication industry. It is a promising market prospect for tower telecommunication business in order to fulfill the telecommunication service provider’s company to support its service and infrastructure. The growth of telecommunication service user gives a significant impact on the company’s business to maintain its competitive advantage. Unfortunately, the net profit from PT Bali Towerindo Sentra is lower than companies in the same industry. In order to increase the profit, PT Bali Towerindo has to expand the business and it is important to matches the asset being financed. Therefore, determine the optimal debt- equity ratio is crucial to maximizing the company’s value. To answer the business issue, there are two analysis that been used, external and internal analysis. External analysis consists of PESTEL and Porter Five Forces analysis and internal analysis consist of the DuPont system and other financial ratios. Based on business issue analysis, it is found that the debt is low related to the average industry; however, the interest coverage ratio is higher than the average industry.The simulation for finding the optimal debt ratio using the year 2018 and 2019 with the cost of capital approach. To maximize the firm value, the cost of capital should be in the lowest that lead to optimal debt ratio. According to the optimal capital structure’s calculation, it can be concluded that the capital structure in 2018 is 50.73% and the optimal is 40%. The estimated capital structure in 2019 is 52.11% and the optimal is 40%. In order to achieve the optimal debt ratio, it needs to perceive the lowest cost of capital so that the firm value will be maximized. By decreasing the debt ratio in 2018 the firm value can increase by Rp132,923 million and in 2019 firm value can increase by Rp167,604 million.Keywords: Cost of Capital, Firm Value, Interest Coverage Ratio, Optimal capital structur