THE EXCESS RETURN ARGUMENT AND DOUBLE LEVERAGE

William Beranek, James A. Miles

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Abstract

The excess return argument is widely accepted as the most compelling plea in favor of the double leverage method of assessing the cost of capital for certain utilities. The argument is shown to be mistaken. Moreover, only under unlikely conditions does the double leverage method assess the cost of capital correctly. The stand alone method, according to generally accepted financial theory, is a superior procedure.

Original languageEnglish (US)
Pages (from-to)143-150
Number of pages8
JournalFinancial Review
Volume23
Issue number2
DOIs
Publication statusPublished - May 1988

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All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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