Assignment 2: Cost of Debt and Equity

profilemcahan

The manager of Sensible Essentials conducted an excellent seminar explaining debt and equity financing and how firms should analyze their cost of capital. Nevertheless, the guidelines failed to fully demonstrate the essence of the cost of debt and equity, which is the required rate of return expected by suppliers of funds.

You are the Genesis Energy accountant and have taken a class recently in financing. You agree to prepare a PowerPoint presentation of approximately 6–8 minutes using the examples and information below:

  1. Debt: Jones Industries borrows $600,000 for 10 years with an annual payment of $100,000. What is the expected interest rate (cost of debt)?
  2. Internal common stock: Jones Industries has a beta of 1.39. The risk-free rate as measured by the rate on short-term US Treasury bill is 3 percent, and the expected return on the overall market is 12 percent. Determine the expected rate of return on Jones’s stock (cost of equity). Here are the details:

Jones Total Assets

$2,000,000

Long- & short-term debt

$600,000

Common internal stock equity

$400,000

New common stock equity

$1,000,000

Total liabilities & equity

$2,000,000

Develop a 10–12-slide presentation in PowerPoint format. Perform your calculations in an Excel spreadsheet. Cut and paste the calculations into your presentation. Include speaker’s notes to explain each point in detail. Apply APA standards to citation of sources. Use the following file naming convention: LastnameFirstInitial_M4_A2.ppt.

By Wednesday, August 5, 2015, deliver your assignment to the M4: Assignment 2 Dropbox.

    • 9 years ago
    • 20
    Answer(7)

    Purchase the answer to view it

    blurred-text
    NOT RATED
    • attachment
      cost_of_debt_and_cost_of_equity.xlsx
    • attachment
      cost_of_debt_and_cost_of_equity.xlsx
    • attachment
      cost_of_debt_and_cost_of_equity_plain.pptx

    Purchase the answer to view it

    blurred-text
    NOT RATED
    • attachment
      34_34_34_cost_of_equity_1.pptx
    • attachment
      b2_b2_b2_2013-01-13_113144_cost_of_equity_1.docx
    • attachment
      d3_d3_d3__sensible_essential_1.xls

    Purchase the answer to view it

    blurred-text
    NOT RATED
    • attachment
      cost_and_debt_equity_sensible_essential.xls
    • attachment
      cost_and_debt_equity.docx
    • attachment
      cost_and_debt_equity.pptx

    Purchase the answer to view it

    blurred-text
    NOT RATED
    • attachment
      expected_rate_of_interest.ppt

    Purchase the answer to view it

    blurred-text
    NOT RATED
    • attachment
      cost_of_capital_excel_calculation.zip

    Purchase the answer to view it

    blurred-text
    NOT RATED
    • attachment
      cost_of_equity.pptx
    • attachment
      cost_of_equity.docx
    • attachment
      sensible_essential.xls

    Purchase the answer to view it

    blurred-text
    NOT RATED
    • attachment
      cost_of_debt_and_equity.zip