We cannot measure the cost of equity capital exactly

Journal Article · Thu Aug 16 00:00:00 EDT 1984 · Public Util. Fortn.; (United States)

OSTI ID:6589074

Bierman, H Jr

This article argues that because all known methods of estimating the cost of equity capital require forecasts and contain measurement errors any measure of a firm's cost of equity will be an estimate. It cannot be expected that the known models will lead to exact measures. Fortunately, in situations where the firm's common stock is traded on a market, we do not need to estimate the cost of equity capital if the objective is to allow a fair return to the firm's stockholders. The article briefly reviews the conventional ways of estimating the cost of equity capital and then presents the logic and arguments for the proposed alternative. 4 references.

• Research Organization: Cornell Univ., Ithaca, NY
• OSTI ID: 6589074
• Journal Information: Public Util. Fortn.; (United States), Journal Name: Public Util. Fortn.; (United States) Vol. 114:4; ISSN PUFNA
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
CAPITAL
COST ESTIMATION
PUBLIC UTILITIES