Publication Date

1964

Document Type

Dissertation/Thesis

First Advisor

Kreidle, John R.||Carey, Edwin L.

Degree Name

M.S. (Master of Science)

Legacy Department

Department of Finance

LCSH

Public utilities--United States--Finance; Capital

Abstract

The purpose of this investigation is to determine the effect that various changes in the capital structure have had on the coat of capital of public utilities over the period 1952-1962. In order to determine this relationship, a sample of twenty-six public utilities was selected from Moody's Public Utility Manuals. The weighted average cost of capital and the percentage of fixed securities in capital structure of each firm were presented in two-year intervals starting with 1953. The weighted average cost of capital (X variable) was then related to the percentage of fixed securities in the capital structure (Y variable) on scatter diagrams for individual public utilities over the period 1952 to 1962. The data was presented in two-year intervals starting with 1953. The weighted average cost of capital (X variable) was also related to the percentage of fixed securities in the capital structure (X variable) on scatter diagrams for the entire sample for the years 1953, 1957, and 1961. The results of these statistical tests indicate that there is a direct relationship between the cost of capital and the capital structure. The scatter diagrams demonstrate that, as the percentage of fixed securities in the capital structure is increased, the cost of capital will decline. However, a critical point is reached where increases in the percentage of fixed securities in the capital structure will result in a top-heavy capital structure and the cost of capital will rise. These results were proven to be in agreement with the traditional theory on the cost of capital. The traditonal theory suggests that the cost of capital curve of a firm is saucer-shaped.

Comments

Includes bibliographical references.||Includes illustrations.

Extent

iii, 57 pages

Language

eng

Publisher

Northern Illinois University

Rights Statement

In Copyright

Rights Statement 2

NIU theses are protected by copyright. They may be viewed from Huskie Commons for any purpose, but reproduction or distribution in any format is prohibited without the written permission of the authors.

Media Type

Text

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