On the Use of the CAPM in Public Utility Rate Cases: Comment Author(s): Dennis E. Peseau and Thomas M. Zepp Reviewed work(s): Source: Financial Management, Vol. 7, No. 3 (Autumn, 1978), pp. 52-56 Published by: Wiley on behalf of the Financial Management Association International Stable URL: http://www.jstor.org/stable/3665011 . Accessed: 08/02/2013 07:25 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms
Words: 3565 - Pages: 15
fiscal years on advertising and $100M on technology upgrades. Management would need to consider if this large capital investment would directly result in future cash flows large enough to offset these investments at a rate that would satisfy the debt owners and shareholders. Management would need to determine the rate of return for these investments and compare this to the cost of capital, calculated using betas from comparable companies to determine accurate relationships to market fluctuations.
Words: 646 - Pages: 3
indispensable for project investors to identify and manage the risks related to the investment. Investment Management Investment management is the professional asset management of various securities (shares, bonds and other securities) and other assets (e.g., real estate) in order to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations, charities, educational establishments etc.) or private investors (both directly
Words: 4274 - Pages: 18
Midland Energy/Sample 2 Midland Energy Resources, Inc. Midland Energy Resources, Inc. is a global energy company that operates in oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. Midland’s most profitable segment is its E&P division which produces 67% of the company’s net income (Exhibit 3). Its largest division is R&M with the Petrochemical division being the smallest. The primary goals of Midland’s financial strategy are to fund substantial overseas
Words: 2133 - Pages: 9
each of its lines of business, what would happen to the company over time? 5. What is the cost of capital for the lodging and restaurant divisions of Marriott? a. What risk free rate and risk premium did you use in calculating the cost of equity for each division? Why did you choose these numbers? b. How did you measure the cost of debt for each division? Should the debt cost differ across divisions? Why? c. How did you measure the beta of each division? Case Hints and Suggestions The
Words: 3319 - Pages: 14
Beta Management Company In early January 1991, Sarah Wolfe was in her office considering new goals and directions for her company forth coming year. Ms. Wolfe was the founder and CEO fo the Beta Management Group, a small investment management company based in a Boston suburb. She dealt with a growing number of high-net-worth individual clients and had $25 million in assets under management. Beta’s investment success during the past year had brought in a steady stream of new clients and additional
Words: 1243 - Pages: 5
seek to exploit what has been identified in studies by academics and practitioners alike as an equity pricing anomaly. This anomaly joins previously identified persistent stock market inefficiencies associated with low price-tobook and smaller company shares. This article evaluates the low volatility anomaly, its potential causes, whether it is likely to persist, and the role, if any, of low volatility equity investing in long-term investment programs. Based on historical information, we
Words: 4676 - Pages: 19
| | | CONTENTS ➢ Acknowledgement……………………………….. ➢ Objective…………………………………………1 ➢ Covariance………………………………………. ➢ Correlation………………………………………. ➢ Beta and its role…………………………………. ➢ Beta coefficient………………………………….. ➢ Capital asset pricing model (capm)……………... ➢ Cost of equity……………………………………. ➢ Weighted average cost of capital (wacc)………... ➢ Bibliography……………………………………... ACKNOWLEDGEMENT I would
Words: 2479 - Pages: 10
of quality and is defined as the degree to which stores conform to prescribed standards related to logistics activities. Many scholars like Maani et al. (1994), White (1996), and Krishnan et al. (2000) argue that investment in CQ may benefit the company in a long term, but there is limited empirical evidence for the positive effect of CQ on financial
Words: 1164 - Pages: 5
Beta measures the systematic risk of a security or a portfolio in contrast to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected returns of an asset based on its beta and expected market returns. Beta is calculated using regression analysis, it can be viewed as the trend of a security's returns to respond to movement in the market. A beta of 1 indicates that the security's price will move with the market. A beta less than 1 indicates
Words: 1156 - Pages: 5
