Estimating the cost of equity capital for electric utilities: 1958-1976

Journal Article · · Bell J. Econ. Manage. Sci.; (United States)

DOI:https://doi.org/10.2307/3003354· OSTI ID:5850791

Thompson, H E

This article uses an infinite-growth model to estimate the cost of equity capital for electric utilities for the period 1958-1976. The infinite-growth model permits the development of a simple linear regression relating market-price-to-book-value ratios to rates of return. From this regression, an estimate of the average cost of equity capital can be derived for the firms in the sample. This particular study neither specifically recognizes capital structure or dividend policies of the individual firms nor specifically analyzes the effects of flow-through normalization or allowance for funds used during construction differences among companies. Although the analysis is historical, the methodology holds promise for being useful in determining just and reasonable rates of return in rate cases.

• Research Organization: Univ. of Wisconsin, Madison
• OSTI ID: 5850791
• Journal Information: Bell J. Econ. Manage. Sci.; (United States), Journal Name: Bell J. Econ. Manage. Sci.; (United States) Vol. 10:2; ISSN BJEMA
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
296000* -- Energy Planning & Policy-- Electric Power
ACCOUNTING
AFUDC
CAPITAL
COST
DATA
DATA FORMS
ELECTRIC UTILITIES
GRAPHS
INCOME
INFORMATION
INTEREST RATE
MANAGEMENT
NUMERICAL DATA
PUBLIC UTILITIES
RATE STRUCTURE
SIMULATION
TABLES
THEORETICAL DATA