A Financial Feasibility Study to Determine the Best Funding Structure for a Total Renovation Project of the Karebosi Field in Makassar

: The objective of this study is to determine the best debt-equity combination to fund the Public-Private Partnership (PPP) project applying the Build-Operate-Transfer (B-O-T) scheme for the total renovation of Karebosi Field in Makassar City, Indonesia. To assess the feasibility of the project, the financial feasibility study methodology is conducted. The study covers an analysis of both external and internal analysis. The external analysis covers the analysis of macroeconomic factors and microeconomic factors utilizing the PESTEL and Porter's Five Forces framework. The internal analysis is focused on the resources of the project. The SWOT analysis presents the outcomes of both external and internal factors. In addition, the author presents three funding structure scenarios as potential alternatives to fund the project. The funding scenarios consist of three alternatives: scenario 1 of full equity funding, scenario 2 of hybrid funding with a proportion of 50% debt and 50% equity, lastly, scenario 3 of hybrid funding with a proportion of 70% debt and 30% equity. Along with that, the author also considers the operational occupancy scenarios that include worst-case, base-case, and best-case scenarios. The percentages of each of the three scenarios are 40%, 60%, and 80%. Following that, the financial projections are calculated for each scenario, resulting in investment measurements such as Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period. Finally, a risk analysis is performed to assess the sensitivity of the best funding structure and to identify potential risks. Additionally, the evaluation of risk mitigation is added to enhance the overall effectiveness of the best funding structure. The findings indicate that the project is feasible, and scenario 3 of hybrid funding with the combination of 70% debt and 30% equity is the best funding structure for the project. In addition, the author performs a sensitivity analysis on the best funding scenario, considering ten input variables. Furthermore, the sensitivity analysis indicates that five variables, namely WACC, assumption of operational occupancy per day, interest rate, soccer field rental rate, and the ratio of operating expenses to revenue, significantly impact the net present value (NPV). Strategies to reduce potential risks are effective marketing and operations, managing occupancy rate volatility using backup strategies, developing new revenue streams, and negotiating long-term rate fixes with lenders. Therefore, future research can explore the dynamic nature of the external factors that influence the Internal Rate of Return (IRR), Net Present Value (NPV), Payback Period, and Weighted Average Cost of Capital (WACC). Determining the best funding may require ongoing research to assess the effects of market conditions, interest rate fluctuations, and industry-specific factors. Furthermore, explore how input variables like WACC, operational occupancy per day, interest rate, soccer field rental rate, and operating expense ratio to revenue affect NPV.


INTRODUCTION
According to a statement released by the Indonesian National Sports Committee (KONI) Makassar, the athletes' accomplishments in various sports branches during the period of January 1 to August 25, 2022, resulted in a total of 161 gold medals, 108 silver medals, and 89 bronze medals, totaling 350 medals, which were achieved at both the provincial and national levels. Makassar City emerged as the overall champion in the XVII South Sulawesi Province Sports Week competition held in October 2022. Makassar has undergone phases of physical development both in its human capital and infrastructure. The establishment of sports facilities is a contributing element to the development of local areas. In addition to the cultural and societal attributes, the character and disposition of a nation also constitute a significant contributor to its economic growth.
One of the manifestations of the Makassar City Government's responsibility to organize and improve public facilities is to conduct a total renovation of the Karebosi Field to become Karebosi Sports Center. The existing Karebosi Field can be considered a landmark

L. Payback Period
The Payback Period measures the time it takes for a business to recoup its initial investment. It helps compare investment options and choose ventures with quicker returns. This metric is valuable for organizations prioritizing prompt return on investment [12].
M. Sensitivity Analysis Sensitivity analysis is a technique used in financial modeling to understand how changes in independent variables impact a dependent variable under specific conditions. It is widely employed in various fields, including biology, geography, economics, and engineering. The purpose of sensitivity analysis is to assess the effects of factors such as production volume, selling prices, costs, investment expenses, and interest rates on economic indicators like net present value, profit, and return on investment. The process involves analyzing the correlation between variations in these factors and their impact on the selected economic parameters of the project [15].

N. Risk Mitigation
Risk mitigation is a systematic approach to minimizing the negative impact of risks by implementing measures that reduce exposure. It involves reducing the likelihood and consequences of risks. Mitigation procedures emphasize the importance of identifying and focusing on the risk factors relevant to the subject being examined [18].

RESEARCH METHODOLOGY
This research design is divided into 5 chapters. The first chapter will discuss, Background Research: This section summarizes prior research on the topic. It helps to understand existing knowledge and identify gaps and opportunities for further study ; Project Description: This section describes the research project's goals, objectives, and outcomes. It describes the study's goals and implications ; Business Issue: The specific business problem or issue that the research seeks to address is identified and explained. It helps establish the relevance and importance of the study in the context of real-world business challenges ; Business Situation Analysis: This section involves analyzing the current business situation or context that led to the identification of the business issue. It may include factors such as industry trends, market conditions, competitive landscape, organizational challenges, or any other relevant factors affecting the business ; Research Question and Objectives: The identified business issue informs the research question(s). The study's objectives and areas of study are then determined. Research Scope and Limitations: This section defines the study's target demographic, geographical location, and timeframe. It also highlights potential study restrictions such as data access, time, and resource limits.
The second chapter will discuss, Theoretical Foundation: It discusses significant research theories, concepts, and models. The literature review reveals knowledge gaps and inconsistencies. The researcher can identify unexplored areas by examining previous studies. These research gaps justify the current investigation. The literature review reviews field empirical research. It examines these research methods, findings, and limitations ; Conceptual Framework: The inclusion of a literature review aids in the formation and refinement of the conceptual framework utilized in the study. The research aims to identify and analyze the fundamental variables, constructs, and relationships that will be examined in the study. The conceptual framework serves as a theoretical foundation for the research design and aids in the development of hypotheses or research inquiries ; The third chapter will discuss, Research Design: This section discusses the study's general research design. The research's method is discussed. Data collection and analysis are outlined in the research design. It gives a clear research framework and ensures the study is well-structured ; Data Collection Method: This section details the study's data collection procedures. Surveys, interviews, observations, experiments, and document analysis are all data-gathering approaches depending on the research design and question. The target population, sample methods, and data collection tools are explained in the section ; Data Analysis Method: This section examines data analysis approaches. It describes the methods used to analyze, interpret, and make sense of the data. Quantitative methods like statistical analysis or qualitative methods like thematic analysis or content analysis may be used for data analysis.
Research goals and data type should determine the method.
The fourth chapter will discuss, Analysis: This section pertains to the examination and elucidation of the gathered data. This section presents the results derived from the data analysis conducted using the selected data analysis methodology discussed in the preceding chapter. The analysis comprises statistical calculations ; Business Solution: This section proposes a business issue solution based on data analysis. Research findings and aims should support the proposed solution. It may suggest process improvements ; Implementation Plan and Justification: This section details the business solution implementation plan. It details the steps needed to implement the solution. The implementation plan may include dates, roles, budgets, risks, and challenges. The chapter justifies the business solution and execution plan. Based on data research, demonstrates why the chosen solution solves the business challenge. The research question, theoretical framework, and empirical evidence may support the chosen approach.
Lastly, the fifth chapter will discuss: Conclusion: The conclusion summarizes the study and interpretation. Section 4 must inform this conclusion. Statements are used to avoid ambiguity in writing. Conclusions must answer Chapter 1 research questions. This chapter must flow logically and systematically to enable the reader to understand it from beginning to end without having to refer to other chapters ; Recommendation: This section may summarize recommendations or practical/managerial consequences for connected stakeholders from the proposed implementation strategy (prior subchapter). This section can suggest further research.

RESULT AND DISCUSSION
This study is intended to conduct the financial feasibility study of the Karebosi Sports Center project. To support the decisionmaking, the author analyzes and explores the issue through internal and external factors that may have specific impacts on the project and industry. The external factors explore macroeconomic conditions by using the PESTEL approach and the microeconomic analysis explores the industrial condition by using Porter's five forces. On the other hand, the internal factors explore the resources that the project has. Furthermore, the author conducts the financial feasibility study analysis technique to ascertain the process of decision-making. The financial feasibility study serves the purpose of evaluating the viability of the project, determining whether it is feasible or requires a shift in direction towards an alternative concept. After the best funding structure to fund the project was determined, the author then conduct a risk analysis which included sensitivity analysis, and risk mitigation.

A. Funding Structure Scenarios
The author conducted 3 scenarios of funding structure, which in the end the best funding structure to fund the project will be chosen. The project is scheduled to span a period of two years, beginning in 2023, finishing in 2024, and start operating in 2025. The objective is to commence operations immediately upon completion of the project. The Capital Expenditure (CapEx) will be allocated towards the development of the Karebosi Sport Center, encompassing the construction of two Soccer Fields, four Futsal Fields, a Softball Field, and supplementary amenities. Notably, the project will also include the construction of designated parking areas, that includes 400 spots for cars and 600 spots for motorcycles.

H. Best Funding Structure
The best funding structure in this project is determined by the proportion of debt and equity that results in the lowest possible weighted average cost of capital (WACC) for the firm, IRR that exceeds WACC, and the positive NPVs even when applying 3 different operational occupancies per day. This enables the company to undertake many profitable projects. Based on the analysis, the proposed funding structure is hybrid funding with the combination of 70% Debt and 30% Equity. With 3 assumptions of Worst-case, Base-case, and Best-case ranging from 40%, 60%, and 80%, the results of IRR are higher than the WACC. The IRR that exceeds WACC rates means the investment is generating returns higher than the cost of capital, making it potentially attractive for investors. Moreover, the IRR that is higher than the Cost of Equity will also be profitable for the owner of Karebosi Sports Center, the Makassar City Government. Moreover, with the best funding structure resulted in positive NPVs. When the net present value (NPV) of a project or investment is positive, it indicates that the anticipated rate of return will exceed the discount rate. The sensitivity analysis presented in this study reveals that several variables have significant effects on the net present value (NPV) whenever there is a change in the input. These variables include the weighted average cost of capital (WACC), assumption of operational occupancy per day, interest rate, and operating expense ratio to revenue. The Weighted Average Cost of Capital (WACC) variable swings by a positive or negative 20%. The modification of the assumption regarding operational occupancy per day results in a corresponding influence of approximately plus or minus 200% on the Net Present Value (NPV). Furthermore, the variable interest rate, soccer field rental rate, and the ratio of operating expenses to revenue significantly influence approximately +/-100%. When the Weighted Average Cost of Capital (WACC) variable and the assumption regarding operational occupancy per day are adjusted by the swing of +20% and -20%, the impact on the change of Net Present Value (NPV) is approximately +/-40%. Furthermore, it should be noted that the variable interest rate, soccer field rental rate, and the ratio of operating expenses to revenue have a significant influence, with an impact of up to +/-20%.  When the Weighted Average Cost of Capital (WACC) variable, the assumption regarding operational occupancy per day, and the interest rate are adjusted by the swing of +20% and -20%, the impact on the Net Present Value (NPV) is approximately +/-20%.

Figure-4: Tornado Chart -Best-Case Scenario
According to the sensitivity analysis of the 3 scenarios above, it can be concluded that: the variables of the inflation rate, the assumption of an hourly rate of the car and motorcycle parking, and the assumption of 2 hours rate of the futsal field and softball field are the variables that even though a swing of +20% and -20% is conducted, the impact on the change of NPV amount is not that significant and did not require risk mitigation. The best funding structure resulted in a hybrid funding structure with a combination of 70% debt and 30% equity. The decision to choose this scenario is made based on the debt and equity allocation that results in the lowest practical weighted average cost of capital (WACC) for the company. Investment recovery and breakeven point depend on the operational occupancy per day, the investment is anticipated to be recovered and the investor is anticipated to reach the breakeven point at different times. The recommended funding structure's payback periods for the worst-case, base-case, and best-case scenarios range from 3.92 to 11.24 years.

L. Risk Mitigation
Important factors affecting NPV in the event of a swing from the sensitivity analysis demonstrated that when inputs change, several variables have a considerable impact on the net present value (NPV). The weighted average cost of capital (WACC), the assumption of operational occupancy each day, the interest rate, soccer fields rental rate, and the proportion of operating expenses to revenue are some of these variables.
Based on the potential hazards found in the sensitivity analysis, the use of effective marketing and operational strategies, the implementation of backup plans, the negotiation of long-term interest rate fixes, and the implementation of cost-cutting techniques are some risk mitigation strategies.
The project is feasible, and a hybrid funding strategy with 70% debt and 30% equity is suggested as the funding option. The investment in the project is anticipated to be repaid within a specific amount of time, and several important inputs, including WACC, operational occupancy, interest rate, and expenditure ratios, have a big impact on the project's net present value. Strategies are suggested to increase occupancy rates, control occupancy swings, negotiate interest rates, and improve operational effectiveness to reduce potential risks.

RECOMMENDATION FOR FUTURE RESEARCH
In determining the optimal funding, it is crucial for the Internal Rate of Return (IRR) to exceed the Weighted Average Cost of Capital (WACC). The concept of risk-adjusted return is captured by the weighted average cost of capital (WACC), which considers the cost of both debt and equity and represents the average cost of capital for a company. The stated concept denotes the minimum level of return that investors demand to offset the inherent risk linked with a specific investment. An organization can evaluate the feasibility of a specific investment undertaking through a comparative analysis of the Internal Rate of Return (IRR) and the Weighted If the internal rate of return (IRR) is higher than the weighted average cost of capital (WACC), this implies that the investment is potentially attractive and produces profits that surpass the expense of funding. This suggests that the project is generating value for the organization and holds the possibility of augmenting the wealth of its shareholders.
If the Internal Rate of Return (IRR) is less than the Weighted Average Cost of Capital (WACC), it implies that the project is not producing returns that are adequate to compensate for the capital cost, which may indicate a heightened level of risk.
When the Internal Rate of Return (IRR) surpasses the Weighted Average Cost of Capital (WACC), the Free Cash Flow to the Firm (FCFF) is anticipated to rise since the project is producing favorable cash inflows. Enhancing the organization's financial standing can fortify its position and furnish additional resources for forthcoming investments, debt settlement, distribution of dividends, or other purposes that are advantageous to the company and its stakeholders.
The findings indicate that five variables, namely WACC, assumption of operational occupancy per day, interest rate, soccer field rental rate, and the ratio of operating expenses to revenue, significantly impact the net present value (NPV).

RECOMMENDATION FOR INVESTORS
Investors must consider FCFF and FCFE while assessing a project or firm. FCFF and FCFE financial performance measurements show cash available after capital and debt requirements. FCFF is the cash accessible to all financial claim holders, including common stock, bondholders, and lenders. FCFF helps investors determine whether to invest in a firm by assessing its overall value. FCFE defines cash available for common shareholders following capital and debt obligations. FCFE shows common stockholder cash more clearly. FCFE helps investors appraise a company's equity. Consider the financial goals while choosing FCFF or FCFE. FCFF may be a better statistic for bondholders and lenders assessing the company's value. FCFE may be important if their focus is equity value and corporate stock investment. However, it is important to remember that FCFF and FCFE are complementary analytical tools. Looking at both can provide a more complete picture of a company's financial performance and help investors make better decisions.