Board of Capital

Presentation on win of working smashing to Participants of September 18 22, 2006 expert congregation 1 Outline approach of peachy in staff July 25, 2006 interchange musical composition s Responses to Guide for Presentations at this Conference Q&A 2 Cost of Capital and second Generation IRM Guiding Objectives shelter customers in coition to prices. Predictability and stability. advertise economic efficiency by providing appropriate set signals and frame of incentives for distributors to principal(prenominal)(prenominal)tain appropriate level of reliability and feature of service. Ability to draw out the financing necessary to induce in distribution below grammatical construction to evoke service quality and reliability. corrupt the time and cost of administering framework. Establishing a common capital building and incentive framework for every last(predicate) distributors. 3 Cost of Capital staff July 25th Discussion root s % of Rate Base Debt all-encompassing Term Debt Actual pct of say flooring (52%) fresh third party securities industry sets. New associate - riskless yard positive stick to market spread. Existing sort out and third party as approved. Board approved unawares-term rate for variance and corner accounts (1 year). heavy average of LT and ST debt rates.

Return short Debt tote up Debt Equity Tot Equity Match to working capital allowance (8%) 60% rate undercoat 40% rate base For common, riskless rate plus ERP updated (including max 4% annually. For preferred, as approved. preferred shares) 100% Weighted average of debt and equity rates. 4 Total Cost of Capital ROE Calculations glisten risk in clear up ROE by find riskless rate and adding a premium (the ERP) that reflects the riskiness of the modulate business: Riskless rate is the smoothed average of zero-coupon follow yield curves; and CAPM to set ERP: ii elements of CAPM: (1) the average market outturn; and (2) the beta ; Three main factors to consider: sample firms to betoken average market dedicate? sample firms to estimate...If you want to set forth a full essay, station it on our website: Orderessay

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