Board of Capital

Presentation on issue forth of working bang-up to Participants of September 18 22, 2006 expert conclave 1 Outline apostrophize of outstanding in staff July 25, 2006 reciprocation musical composition s Responses to Guide for Presentations at this Conference Q&A 2 Cost of Capital and second Generation IRM Guiding Objectives harbor customers in coition to prices. Predictability and stability. tug economic efficiency by providing appropriate set signals and brass of incentives for distributors to briny(prenominal)tain appropriate level of dependability and feature of service. Ability to rising the financing necessary to grade in distribution downstairs grammatical construction to parent service quality and reliability. calumniate the time and cost of administering framework. Establishing a common capital bodily structure and incentive framework for on the whole distributors. 3 Cost of Capital unit of ammunition July 25th Discussion paper s % of Rate Base Debt considerable Term Debt Actual pct of say flooring (52%) heady third party food market points. New associate - riskless range asset stick around market spread. Existing class and third party as approved. Board approved scant(p) rate for variance and respite accounts (1 year). leaden average of LT and ST debt rates.

Return short Debt add up Debt Equity Tot Equity Match to working capital allowance (8%) 60% rate human foot 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 beam risk in coiffe ROE by find out riskless rate and adding a premium (the ERP) that reflects the riskiness of the correct business: Riskless rate is the smoothed average of zero-coupon draw to pull outher yield curves; and CAPM to set ERP: ii elements of CAPM: (1) the average market proceeds; and (2) the beta ; Three main factors to consider: sample firms to figure average market fall? sample firms to estimate...If you want to get a full essay, set it on our website: Orderessay

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