Calculating the Revenue Requirement in Electricity
Calculating the Revenue Requirement in Electricity Calculating the Revenue Requirement in Electricity
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11.07.2015
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Cost of Capital• Debt Capital• Contractual Return (Interest)• Equity Capital• Noncontractual Return (Dividends & Growth)• Riskier than Debt, therefore, higher cost toinduce investors9
Return on EquityDividend = $4.00 per share of stockStock Price = $100.00 per share of stockDividend Yield = ($4.00/$100.00) 4%+Expected Growth in Investment = 6%Total expected return = 10%10
- Page 1 and 2: Calculating the RevenueRequirement
- Page 3 and 4: Revenue Requirement Formula• Requ
- Page 5 and 6: Rate of Return• Compensation to i
- Page 7 and 8: Equity Capital• Common stock and
- Page 9: Discounted Cash Flows• An investo
Return on EquityDividend = $4.00 per share of stockStock Price = $100.00 per share of stockDividend Yield = ($4.00/$100.00) 4%+Expected Growth <strong>in</strong> Investment = 6%Total expected return = 10%10
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