Description
Shortcomings

DCF Cost of Equity

Indicative Results

The following table calculates an indicative DCF cost of equity using historical dividend growth for "g" in the single stage DCF model:


Company Name Stock Price 01/29/99 Annual Dividend Dividend Yield 5-Yr. Historical Div. Growth (1) Ke Using Hist. Div. DCF
Allegheny Energy 31.63 1.72 5.44% 1.0% 6.44%
BEC Energy 38.25 1.88 4.92% 3.0% 7.92%
Baltimore G&E 27.25 1.68 6.17% 2.5% 8.67%
CMS Energy 42.81 1.32 3.08% 17.5% 20.58%
Carolina P&L 41.63 1.94 4.66% 3.5% 8.16%
Central & S.W. 26.44 1.74 6.58% 3.5% 10.08%
Cen. Hudson G&E 40.31 2.16 5.36% 2.0% 7.36%
Cinergy Corp. 31.31 1.80 5.75% 1.5% 7.25%
Consolidated Ed 49.44 2.12 4.29% 2.0% 6.29%
DPL, Inc. 18.94 0.94 4.96% 4.0% 8.96%
DQE, Inc. 39.44 1.44 3.65% 6.0% 9.65%
DTE Energy 40.56 2.06 5.08% 2.0% 7.08%
Duke Power 61.81 2.20 3.56% 4.5% 8.06%
Edison Intn'l 27.81 1.04 3.74% -6.0% -2.26%
Energy East 51.19 1.60 3.13% -8.0% -4.87%
FPL Group 54.88 2.00 3.64% -5.0% -1.36%
FirstEnergy 31.06 1.5 4.83% -1.0% 3.83%
Fla. Progress 41.63 2.14 5.14% 2.0% 7.14%
GPU, Inc. 42.63 2.06 4.83% 6.0% 10.83%
Hawian Elect. Ind. 37.44 2.48 6.62% 1.5% 8.12%
IPALCO 49.75 1.1 2.21% 1.0% 3.21%
Illinova 24.438 1.24 5.07% 23.5% 28.57%
Interstate Energy 28.94 2.00 6.91% 2.0% 8.91%
Kansas City P&L 28.31 1.66 5.86% 3.0% 8.86%
LGE Energy 26.38 1.23 4.66% 3.5% 8.16%
MidAmerican Energy 26.81 1.20 4.48% -3.5% 0.98%
Minnesota Power 40.44 2.04 5.04% 1.5% 6.54%
Montana Power 52.5 1.6 3.05% 1.5% 4.55
NIPSCO Ind. 27.13 0.96 3.54% 8.0% 11.54%
New Century Energies 44.00 2.32 5.27% 1.0% 6.27%
New England Elect. 48.94 2.36 4.82% 2.5% 7.32%
Northeast Utilities 15.31 0.00 0.00% -8.5 -8.50
Northern States Power 26.94 1.43 5.31% 2.5% 7.81%
OGE Energy 25.31 1.33 5.25% 0.5% 5.75%
Orange & Rockland 56.75 2.58 4.55% 1.5% 6.05%
PECO Energy 38.19 1.00 2.62% 5.5% 8.12%
PP&L Resources 26.69 1.00 3.75% 1.5% 5.25%
PacifiCorp 20.56 1.08 5.25% -6.0% -.75%
Potomac Electric Power 23.31 1.66 7.12% 1.5% 8.62%
PS Enterprise Group 39.56 2.16 5.46% 0.5% 5.96%
SCANA Corp. 27.69 1.54 5.56% 2.5% 8.06%
SIGCORP Inc. 32.63 1.21 3.71% 3.0% 6.71%
Southern Co. 26.94 1.34 4.97% 3.0% 7.97%
TECO Energy 23.25 1.24 5.33% 5.5% 10.83%
Texas Utilities 43.94 2.20 5.01% -5.0% 0.01%
Unicom Corp. 35.63 1.60 4.49% -10.5% -6.01%
UtiliCorp 35.00 1.80 5.14% 2.5% 7.64%
WPS Resources 32.75 1.98 6.05% 2.5% 8.55%
Western Resources 31.44 2.14 6.81% 1.5% 8.31%
Wisconsin Energy 26.00 1.56 6.00% 4.0% 10.00%
Avg./ DCF Cost of Equity N/M N/M 4.77% 1.89% 6.66%

(1) Source: Value Line, January, 1999

The following table calculates an indicative DCF cost of equity using projected earnings growth for "g" in the single stage DCF model:

Company Name Stock Price 01/29/1999 Annual Dividend Dividend Yield 5-year Projected (2) EPS Growth Ke Using Proj. EPS DCF
Avg./ DCF Cost of Equity N/M N/M 4.77% 5.36% 10.16%

(2) Source: Value Line, January, 1999

This last table calculates an indicative DCF cost of equity using the 2-stage model with projected earnings growth for "gs" and EIA(3) GDP growth for "gl":

Company Name Dividend Yield First Stage Growth Second Stage Growth Compound Average Growth Ke Using 2-Stage DCF
Avg./ DCF Cost of Equity 4.77% 5.36% 5.02% 5.11% 9.88%

(3) Source: Energy Information Administration Annual Energy Outlook 1998


Updated on 9/15/98

paulconsul@aol.com