The manager of Sensible Essentials conducted an excellent seminar explaining debt and equity financing and how firms should analyze their cost of capital.
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 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:
- 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)?
- 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
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 calculation 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 Monday, August 20, 2012, deliver your assignment to the M4: Assignment 2 Dropbox.
Answer rating (rated one time)
Assignment 2 Cost of Debt and Equity(Complete Answer With PowerPoint Presentation)
body preview (10 words)
Your xxxxxxxxxx is attached..Thanks xxx xxxxxxxxxx my this xxxxxxxxxxx
file1.docx preview (331 words)
Cost xx Equity:-
Cost of xxxxxx xx defined as the return which stockholders require on xxxxx xxxxxxxxxxxx xx is the required xxxx of return xxx xxx stockholder but xx is xxxx for the company. xxxx xx xxxxxx can xx calculated in two ways. xxxxxxxx valuation xxxxx and Capital Asset xxxxxxx models xxx the xxxx xxxxxxx xxxxx cost of xxxxxx xx calculated.
xxxxxxxx for xxx xxxx xxx models xxx given xxxxxxx
k.e x xxxxxxxxxxxx
Rm x Market xxxxxx
xxx xxxx xxxx return
CAPM, defined xx investopedia. xxxxxxxxx from xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxx Valuation xxxxxxx
xxx = xxxxxxxx per xxxxxxxxxxxxx xxxxxx value xx xxxxx x Growth rate xx dividends.
xxxx of Debt:-
Debts xxx the borrowing which company takes xx finance xxx company xxxxxxxxx they xxxx to pay xxxxxxxx xx those borrowing. xx xxx cost xx debt is that interest which xxxxxxx xxx to xxx on xxx xxxxxxxxxx and normally it is xxxxx xxxxx tax xx xx xx the tax xxxxxxxxxx expense.
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file2.xls preview (41 words)
|Cost xx xxxx|
|Interest ratex||x xx xxxx xxxxxxx|
|The x in PVIF formula isx||6.0147727404x||xxxxxx|
|xxxx xx Equity|
|xxxx xx xx used xx xxxxxxxx xxxx of return|
file3.pptx preview (245 words)
Cost of xxxx
Cost of debt = xxxxxxxx xxxxxxxx
xxxxx xxx the xxxxxxxxx which xxxxxxx xxxxx to xxxxxxx xxx company xxxxxxxxx xxxx have xx pay xxxxxxxx on xxxxx xxxxxxxxxx So the xxxx of debt is xxxx interest xxxxx xxxxxxx has to pay on xxx borrowings xxx normally xx is taken xxxxx tax xx xx is the xxx deductible xxxxxxxxx
xxxx xx Debt
x xx PVIF xxxxxxx
The x in xxxx xxxxxxx xx
xxxx xx Equity (CAPM)
xxxx xx equity x (Rm-Rf)*Beta
Cost xx xxxxxxxxxxxxxxxx xxxxxxxxx xxxxxx
Cost xx xxxxxx = Dividend per share/Current Market xxxxx xx xxxxx x xxxxxx rate of dividends.
xxxx xx equity xx xxxxxxx as xxx xxxxxx xxxxx stockholders require xx their investments. xx xx the required xxxx of return xxx the stockholder xxx xx xx xxxx for the company. xxxx of xxxxxx can xx calculated in two xxxxx Dividend xxxxxxxxx model and xxxxxxx Asset Pricing xxxxxx are the ways xxxxxxx which cost xx xxxxxx is calculated.
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