1 / 13

Regulatory Climate: Changing Tides, or the Perfect Storm?

Regulatory Climate: Changing Tides, or the Perfect Storm?. PANEL 5 New Twists on the DCF (Part II: Application) Pauline M. Ahern, CRRA Vice President AUS Consultants – Utility Services. Standard Discounted Cash Flow Model Basic Equation.

niyati
Download Presentation

Regulatory Climate: Changing Tides, or the Perfect Storm?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Regulatory Climate: Changing Tides, or the Perfect Storm? PANEL 5 New Twists on the DCF (Part II: Application) Pauline M. Ahern, CRRA Vice President AUS Consultants – Utility Services . 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  2. Standard Discounted Cash Flow ModelBasic Equation • Assuming dividends grow at a constant rate, (g), then: • n • P0 = ∑ Dt / (1+K) t • t=1 • Dt = D0 (1 + g) t • P0 = D1 / ( K - g ) • K = ( D1 / P0 ) + g • Where: • P0 = Market price • D0 = Dividend per share • D1 = Next period dividend per share • g = Growth rate • K = Cost of common equity capital • . 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  3. Dividend YieldsAverage for the Peer Group 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  4. Growth RatesAverage for the Peer Group Current Projected Long-Term EPS Consensus Growth Rates: Zacks: 5.33% Reuters: 5.72% (7 estimates) ThomsonFN / I/B/E/S: 6.05% (9 estimates) Value Line Growth Rates (as of January 2006) Past 10 yearsPast 5 YearsProjected 2009-2011 Cash Flow5.0% 7.0% 4.5% EPS6.5% 13.5% 9.0% DPS1.5% 2.0% 6.5% BVPS5.5% 8.5% 6.0% BR + SV* 4.5% 6.5% 4.0% Market Price Appreciation: Most Recent 12-months: 3.78% Value Line Projected ’09-’11: 22.5% * Internal + External Growth 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  5. Dividends, Market Prices & Book Value Per ShareAverage for the Peer Group 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  6. General Information • Average Return Rate on Common Equity for the Peer Group: • Actual AchievedValue Line Proj’d • 200120022003200420052009-2011 • 10.51% 9.82% 9.32% 8.45% 7.03% 12.00% • Peer Group Average Current Market-to-Book Ratio: • 1.87x • Peer Group Average Adjusted Value Line Beta (as of January 2006): • 0.90 • Peer Group Average Current Moody’s Bond Rating: • A2 • Peer Group Average Current Standard & Poor’s Bond Rating & Business Profile: • A 4 • . 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  7. General Information – cont’d 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  8. Interest Rate Information 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  9. Discounted Cash Flow ModelApplication Worksheet Dividend Yield: _____________ Comments / Rationale: Growth Rate: _____________ Comments / Rationale: . 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  10. Discounted Cash Flow ModelApplication Worksheet Discounted Cash Flow Model Result: _____________ Comments / Rationale: . 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  11. Discounted Cash Flow ModelApplication Worksheet . 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  12. Discounted Cash Flow ModelApplication Worksheet . 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

  13. Discounted Cash Flow ModelApplication Worksheet . 38th Financial Forum – April 27 – 28, 2006 - Georgetown University Conference Center

More Related