Fair return to equity: why and how
Journal Article
·
· Public Util. Fortn.; (United States)
OSTI ID:6947648
Arguments are presented for measuring the rate of return on utility equity by the ''discounted cash-flow''method, which projects the cash receipts anticipated from dividends and equity shares. This method is compared with the historical ''comparable-earnings'' approach and is found to have a greater potential for attracting new capital at reasonable terms and for maintaining committed capital integrity. Past events and relationships tended to minimize the importance of proper rates of earnings, but justification for allowing a market price to rise above book value is demonstrated to be an efficient and practical way to meet capital goals. Inputs to the capital-asset pricing model (CAPM) are rates of return rather than rates earned on book value. Some critics object that this puts too much reliance on the repetition of past price variations, but it appears to be useful for a regulated industry.
- Research Organization:
- Troupe Kehoe Whiteaker and Kent, Kansas City, MO
- OSTI ID:
- 6947648
- Journal Information:
- Public Util. Fortn.; (United States), Journal Name: Public Util. Fortn.; (United States) Vol. 101:11; ISSN PUFNA
- Country of Publication:
- United States
- Language:
- English
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