Bargain or Bonanza

Deck: 

Is discounted cash flow (DCF) still a reliable tool for determining equity cost?

Fortnightly Magazine - August 2013
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Capital-hungry electric utilities depend on return on equity (ROE) to appropriately compensate existing equity investors and satisfy new equity investment requirements, and look to the Federal Energy Regulatory Commission (FERC), which has extensive transmission jurisdiction, for protection of transmission ROEs. FERC has used discounted cash flow (DCF) analysis to determine ROEs for many years, but the $54 billion question – EEI’s estimate of near-term transmission investment requirements1 – is whether the DCF method is up to the ROE challenge in the current economic climate. 

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