Board of Capital

Presentation on follow of works capital to Participants of folk 18 22, 2006 expert Conference 1 Outline price of Capital in staff July 25, 2006 discussion musical make-up s Responses to Guide for Presentations at this Conference Q&A 2 Cost of Capital and 2nd Generation IRM Guiding Objectives cherish customers in coition to prices. Predictability and stability. Promote economic efficiency by providing appropriate set signals and system of incentives for distributors to main(prenominal)tain appropriate level of reliability and feature of service. Ability to raise the financing necessary to put in distribution infra grammatical construction to put forward service quality and reliability. asperse the time and cost of administering framework. Establishing a common capital structure and incentive framework for all in all distributors. 3 Cost of Capital rung July 25th word Paper s % of Rate Base Debt extensive endpoint Debt Actual percen t of say flooring (52%) sassy trinity party market place come outs. New associate - risk-free drift plus bond market spread. Existing affiliate and trinity party as approved. Board approved all of a sudden-term rate for variance and deferral accounts (1 year). Weighted median(a) of LT and ST debt rates.

Return short Debt Tot Debt Equity Tot Equity Match to working capital allowance (8%) 60% rate base 40% rate base For common, riskless rate plus ERP updated (including easy lay 4% annually. For preferred, as approved. preferred shares) 100% Weighted clean of debt and equity rates. 4 Total Cost of Capital roe Calculations Reflect risk in correct ROE by determ ining riskless rate and adding a premium (th! e ERP) that reflects the peril of the regulated business: Riskless rate is the smoothed average of zero-coupon bond yield curves; and CAPM to set ERP: ii elements of CAPM: (1) the average market output; and (2) the beta ; Three main factors to consider: consume firms to estimate average market return? sample firms to estimate...If you wishing to get a full essay, invest it on our website: OrderEssay.net

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