Question
You are working for a public utility regulatory office. An electricity company has presented the following information for the approval of the rate of return.
You are working for a public utility regulatory office. An electricity company has presented the following information for the approval of the rate of return.
The company claims a total $45m of capital expenses, has a WACC = 8.65%, incurs OPEX = $4m, and depreciation = $2m. The tax rate = 25%. The company is financed 60% by debt and 40% by equity. The regulator determines that 16% is a fair return to equity holders.
How much "total revenue" will you approve for the company?
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Modeling Monetary Economies
Authors: Bruce Champ, Scott Freeman, Joseph Haslag
4th Edition
1316508671, 1316508676, 9781316723302 , 978-1107145221
