Risk Sharing, the Cost of Equity and the Optimal Capital Structure of the Regulated Firm

AbstractThis article focuses on the analysis of the structure and cost of capital in mining companies. Proper selection of appropriate levels of equity and debt capital funding of investment has a significant impact on its value. Thus, to maximize the value of the company, the capital structure of the company should be composed to minimize the weighted average cost of capital. T he objective of the article is to present the capital structure of selected Polish and world’s mining companies and estimate their cost of equity and debt capital. In the paper the optimal capital structure for the Polish mining company (KGHM SA) was also estimated. It was assumed that both Polish and world’s mining companies, have no debt exceeding 45% in the financing structure. For the most of analyzed cases, the level of financing with debt capital is in the range between 10% and 35%. T he cost of equity exceeds the cost of debt capital and is in the range between 8% and 20%, while the cost of debt capital reaches the range between 1.9% and 12%. T he analysis of the optimal capital structure determining, performed for the selected mining company, showed that debt capital funding for the company should be in the range between 5.7% and 7.4%.

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Optimal Capital Structure for BOOT/BOT Model Hydropower Projects in Nepal

Journal of Advanced College of Engineering and Management ◽

10.3126/jacem.v5i0.26720 ◽

2019 ◽

Vol 5 ◽

pp. 117-122

Author(s):

Anup Gautam ◽

Santosh Kumar Shrestha

Keyword(s):

Standard Deviation ◽

Capital Structure ◽

Financial Analysis ◽

Equity Financing ◽

Optimal Capital Structure ◽

Secondary Sources ◽

Hydropower Potential ◽

Optimal Capital ◽

Average Plant ◽

The Cost

Nepal has a huge hydropower potential which is yet to be developed. Hydropower are capital intensive infrastructure where financing from single source is not practical, so a financial mix is essential, i.e. debt and equity financing. Projects have been practicing different financial structures. Therefore a proper capital structure is necessary for maximizing return from the hydropower project. The main objective of this research is to determine the parameters that influence hydropower financing, collect data on parameters, analyze them and determine the optimal capital structure for hydroelectric projects in Nepal. The data of operating hydropower projects are collected from secondary sources mainly Department of Electricity Development, Nepal Electricity Authority and other published internet sources. The data is processed and financial analysis is performed for numerous cases using an excel sheet powered by visual basic application. The key parameters affecting hydropower financing are total project cost, annual generation (Dry and wet energy), interest on loan and interest on equity while other parameters are not frequently variable. The feasibility of the project is found to be greatly influenced by the cost of development and generation revenue. The optimal capital structure of hydropower projects is dependent on the key parameters. The cost of hydropower development in Nepal is found to be diverse with an average per megawatt cost of NRs. 219.2 million and standard deviation of NRs. 65.9 million. Energy generation varies from time to time and plant to plant with an average plant factor of 0.53 (Standard Deviation 0.20) out of which 33.16% is dry energy. The cost of loan varies from 8% to 12% and the cost of equity ranges 12% to 16%. The optimal capital structure for BOOT model hydropower projects in Nepal falls in the range of 11% to 34% with an expected value of 20.79%.

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Levered-Beta and Cost of Capital Sensitivities: An Experimental Investigation in Capital Structure

Journal of Risk and Financial Management ◽

10.3390/jrfm14040152 ◽

2021 ◽

Vol 14 (4) ◽

pp. 152

Author(s):

Kudret Topyan

Keyword(s):

Capital Structure ◽

Cost Of Capital ◽

Weighted Average ◽

Debt Ratio ◽

Bond Ratings ◽

Optimal Capital Structure ◽

Rating Method ◽

Optimal Capital ◽

The Cost ◽

The Impact

Using US firms with over $5b market cap, this paper tests the impact of levered beta on the firm’s market value and optimal capital structure. Using the synthetic rating method in a recursive model, the paper shows the current and optimal weighted average cost of capital sensitivities as the firm’s market risk measured by beta changes. The paper shows that the change in the value of beta due to alternative leverage levels or other risk factors will alter the cost of capital insignificantly and has no impact on the optimal capital structure due to those firms’ extra-strong bond ratings. As a side-benefit of the synthetic rating method, one may also observe the market-level variables’ impacts on the cost of capital computations and the optimal debt ratio. The paper uses Disney Corporation to show how the synthetic rating methodology helps to disclose the sensitivities of hypothetical alternative leverages.

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The Effect of Profitability and Asset Structure to Capital Structure on Non-Bank Financial Institutions Listed On Indonesian Stock Exchange

Journal of Economics, Finance and Management Studies ◽

10.47191/jefms/v4-i2-02 ◽

2021 ◽

Vol 04 (02) ◽

Author(s):

Yuli Rawun ◽

Keyword(s):

Capital Structure ◽

Financial Institutions ◽

Stock Exchange ◽

Sampling Technique ◽

Direct Consequence ◽

Optimal Capital Structure ◽

Negative Effect ◽

Internal Funds ◽

Optimal Capital ◽

The Cost

One of the key decisions faced by financial managers in relation to company operations is funding decisions. The funding decision is seen from the capital structure, good capital structure is the optimal capital structure. The optimal capital structure is a condition in which a firm can use a combination of debt and equity ideally and balancing the value of the firm and the cost of its capital structure. The cost of capital arose is a direct consequence of the decision taken when the manager uses the debt in which there will be the capital cost of interest expense required by creditor. However, if the manager decides to use internal funds, an opportunity cost of funds will be incurred. This research that was used is quantitative data with financial data from the site Indonesian Stock Exchange. The companies that was used is Non-Bank Financial Institutions which published financial statements of the period 2014 – 2016. This research aims to know the effect of profitability and asset structure to capital structure on Non-Bank Financial Institutions Listed on Indonesian Stock Exchange. Analysis method that was used in this thesis is panel data regression with statistical software Views 7 Version. The sample was 30 companies by purpose sampling technique. The independent variables that used are profitability and asset structure, and the variable dependent is capital structure. The results show that profitability partially has insignificant negative effect on capital structure with value of -0.469. Asset structure partially has insignificant positive effect on capital structure with value of 0.945. Profitability and asset structure during 2014 – 2016 simultaneously has significant effect on capital structure on Non-Bank Financial Institutions with value of 0.018. The companies are expected to pay attention to profitability, as it increases profitability equally by increasing internal funding. The used of long term debt align with their firm size because debt will also have its effect to all operational aspect so that asset structure will become optimal.

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ANALISIS STRUKTUR MODAL PADA PERUSAHAAN SEMEN YANG TERDAFTAR DI BURSA EFEK INDONESIA

Al-Amwal Journal of Islamic Economic Law ◽

10.24256/alw.v3i2.492 ◽

2019 ◽

Vol 3 (2) ◽

pp. 235-252

Author(s):

Dirah Nurmila Siliwadi ◽

Siti Hartati Muliawani

Keyword(s):

Capital Structure ◽

Stock Exchange ◽

Weighted Average ◽

Optimal Capital Structure ◽

Debt Capital ◽

Optimal Capital ◽

The Cost ◽

The Capital Structure

The aim to be achieved in this study is to analyze the capital structure of the Cement companies listed on the Indonesia Stock Exchange. Cement companies listed on the Indonesia Stock Exchange for 3 years namely 2011 to 2013 in setting their capital structure policies tend to use their own capital which is greater than debt capital, this can be seen from the proportion of own capital which is greater than the proportion of debt. The optimal capital structure of 3 years from 2011 to 2013 occurred in 2011, namely when the cost of the weighted average capital of the minimum Cement company.

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STRUKTUR MODAL PENDEKATAN DINAMIS PERUSAHAAN OTOMOTIF DAN KOMPONENNYA SAAT KRISIS GLOBAL 2008

Jurnal Ekonomi ◽

10.24912/je.v21i3.24 ◽

2017 ◽

Vol 21 (3) ◽

Author(s):

Syanti Dewi ◽

Ishak Ramli

Keyword(s):

Capital Structure ◽

Firm Size ◽

Firm Value ◽

Cost Of Equity ◽

Global Crisis ◽

Optimal Position ◽

Optimal Capital Structure ◽

Optimal Capital ◽

Debt Cost ◽

The Capital Structure

The increase in business during the global crisis to the challenge of funding and capital structure dynamic analysis approach is suitable for the observation of the capital structure. This study is intended to demonstrate the influence of profitability, firm size, cost of equity, debt cost, and firm value volatility, leverage and speed adjustment sertaoptimal the capital structure. By using the auto company's financial statements and its components in a data 2008-2012 profitability, firm size, cost of equity, debt cost, danfirm value volatility analyzed using multiple regression analysis to examine the effect on the capital structure and leverage optimal data and speed adjustmentdianalisis method Generalized Moment Method (GMM) to examine the achievement of optimal capital structure and speed of achievement of optimal capital structure. The results found that the only significant profitability and firm size negatively affects the capital structure, the cost is being equity, debt cost, and firm value volatilitytidak significantly affect their capital structure. The automotive industry and its components was successfully adjust its capital structure to an optimal position, but the adjustment is slow. In a global crisis of capital structure adjustment to the optimal capital structure is progressing slowly in view of the difficulty of finding external funding sources.

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