Economic rate of return formula
[DOC File]Chapter 7: Net Present Value and Capital Budgeting
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The purpose of setting a regulatory rate of return and asset base is to determine appropriate reference tariffs for third party access. The objective of the regulator in setting the rate of return is to strike a rate of return that restricts excessive profits, but at the same time does not discourage efficient investment.
How to Calculate Economic Rate of Return | Bizfluent
Economic Value = NPV of all future cash flows discounted at opportunity cost of capital. Change in Economic Value during the year = Economic Depreciation (could be negative) Economic Income = Cash Flow – Economic Depreciation. Rate of Return = Economic Income / Economic Value at the Beginning of the year. Example, Problem Set #4, Q7. Weight
[DOC File]Risk and Return
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Formula for Present Value of $1 to be received after t years = 1/(1+r) ^t r= interest rate ... Look at rate of return → if rate of return was very high, might want to defer to company. ... Economic Depreciation: This would allow deduction for the actual decline in an asset’s value during the taxable period.
[DOCX File]Valuation: Measuring and Managing the ... - Wharton Finance
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B) total costs exceed a normal rate of return. C) the normal rate of return is zero. D) the firm is earning an economic profit. Answer: D Diff: 3 Type: C 44) If Pets.com is earning a rate of return less than necessary for the business to continue operations, then A) total revenue exceeds economic costs.
[DOC File]Problem 1:
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If the long-run return on equity is 13.5 percent and the long-run growth in GDP is expected to be 6.7 percent (3.5 percent real growth and 3.2 percent inflation), what is real cost of equity implied by the equity-denominated key value driver formula?
[DOC File]Security Constrained Economic Dispatch Calculation
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Consider the following information about two stocks where the probability of an economic boom is 40%: Economic State Return A (RA) Return B (RB) Boom 38% 6% Recession –4% 12% Calculate the expected return for stock A and stock B. Calculate the standard deviation of stock A and stock B. Calculate the correlation between stock A and stock B.
[DOC File]The major formulas for present value (these will reappear ...
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answer: to find the expected rate of return on the two-stock portfolio, we first calculate the rate of return on the portfolio in each state of the economy. since we have half of our money in each stock, the portfolio’s return will be a weighted average in each type of economy. for a recession, we have: rp = 0.5(-22%) + 0.5(28%) = 3%.
[DOC File]Principles of Microeconomics, 7e (Case/Fair)
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In order to calculate the equivalent annual cost, set the NPV of the word processor equal to an annuity with the same economic life and discount rate. Since the computer has an economic life of three years, set the NPV equal to a three-year annuity, discounted at 14 percent. $115,133 = …
[DOC File]PART A: WHAT IS INCOME - NYU School of Law
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an organization where rate of return on the rate-base is fixed by regulators. In a competitive business enterprise, the most widely used economic evaluation method is called a “discounted cash-flow rate of …
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