Abstract
The current demand for capital funds in this country is at an extremely high level. This high level of demand, in a time when inflation is under attack, has caused interest rates to move upward very rapidly. The full consequences of these two opposing ideas - high demand for funds and an attack on inflation - won't be discernible for quite some time, but there are a few problems related to this which can be seen now. Such things as the collapse of the Penn Central indicate that it is possible that some of the old ideas of corporate life no longer are valid. | While it may be intriguing to investigate the causes of corporate collapse, it seems to be more important to look into the problems associated with currently viable enterprises. Therefore, the problems associated with today's extreme interest costs will merit attention here. In order to have sufficient data available to adequately examine the subject, the regulated public utilities, which are capital-intensive and therefore find it necessary to borrow large amounts of capital, will be used as the analytical subject. Since these entities do borrow so often they generally are forced to pay existing rates for borrowed capital while other, less capital-intensive industries may be able to wait for rates to subside before borrowing. Therefore, one of the prime considerations to be made in the financing of a regulated public utility is the actual timing of borrowing within rather small time constraints.