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Question
Submitted by Pokes1587 on Tue, 2012-08-21 23:30
due on Sat, 2012-08-25 23:25
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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: 

  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 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
Submitted by Assignment Ex... on Sun, 2013-08-11 12:47
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Cost of xxxxxxxx

Cost xx equity xx defined xx xxx xxxxxx which xxxxxxxxxxxx xxxxxxx xx their investments. xx xx the required xxxx of return for the xxxxxxxxxxx xxx xx is cost for xxx company. Cost xx equity xxx xx calculated in xxx xxxxx Dividend valuation model xxx Capital xxxxx Pricing xxxxxx are xxx xxxx xxxxxxx which cost of xxxxxx xx xxxxxxxxxxx

xxxxxxxx xxx xxx xxxx the models are xxxxx below:-

xxxx Model:-

xxx = xxxxxxxxxxxx

xx x Market return

xxx Risk xxxx xxxxxx

Reference:

xxxxx xxxxxxx at xxxxxxxxxxxx. Retrieved xxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxx xxxxxxxxx xxxxxxx

xxx x Dividend per xxxxxxxxxxxxx Market xxxxx xx stock + xxxxxx rate xx dividends.

Cost of xxxxxx

Debts are xxx borrowing xxxxx company takes xx finance the xxxxxxx therefore xxxx have xx xxx interest on those xxxxxxxxxx xx the xxxx of debt xx xxxx interest which company xxx to pay xx xxx xxxxxxxxxx xxx xxxxxxxx it xx xxxxx xxxxx xxx xx xx xx xxx tax xxxxxxxxxx xxxxxxxx

xxxxxxxxxx

xxxx

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Sheet1

xxxxxxxxxxxxx
xxxx xx Debt
xxxxx
Interest xxxxx xx xxxx xxxxxxx
1-1/1+x^10)/x
The x in PVIF formula xx 6.014772740410.50%
xxxx of xxxxxx
xxxxxxxxxxxx15.5%
xxxx xx xx used as xxxxxxxx xxxx xx return
Debt xxxxxxxxxxxx 0.0315
Equitgy 1400000 xxxxx 0.10857
200000014.0%

Sheet2

x

xxxxxx

x


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Answer
Submitted by Kumail Raza on Wed, 2012-08-22 06:51
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Answer file is attached. Feel free to contact for any further assistance.

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xxxx xxx xxxxxx Financing

xxxx xx Debt and xxxxxx

xxxxxxxx xx xxxxxx xxxx

1

xxxx xx Debt

xxxxxxx xx xxxx Financing Debt: Jones xxxxxxxxxx xxxxxxx xxxxxxxx for 10 xxxxx with xx annual xxxxxxx xx $100,000. What xx xxx xxxxxxxx xxxxxxxx xxxx xxxxx xx debt)?

Prepared xx xxxxxx xxxx

2

For xx investment xx be xxxxxxxxxxx xxx xxxxxxxx return xx capital xxxx xx xxxxxxx than the xxxx xx xxxxxxxx The cost xx xxxxxxx xx the rate of return xxxx xxxxxxx xxxxx be xxxxxxxx xx earn in xx xxxxxxxxxxx xxxxxxxxxx xx xxxxxxxxxx risk. If a xxxxxxx xx xx similar risk xx x xxxxxxxxx average business xxxxxxxxxx xx xx xxxxxxxxxx to xxx xxx xxxxxxxxx xxxxxxx xxxx of xxxxxxx xx a xxxxx for xxx xxxxxxxxxxx A company's xxxxxxxxxx xxxxxxxxx include xxxx debt and equity, xxx must therefore calculate xxxx xxx xxxx xx xxxx and the xxxx of xxxxxx to determine a company's xxxx xx capital. xxxxxxxx a rate xx return larger than the xxxx of capital is xxxxxxx required.

2

xxxx xx xxxx

xxxxxxxxxxxxxxxxxxxx

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Answer
Submitted by Good_Morning on Tue, 2014-11-04 20:19
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cost of equity

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cost of equity

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Cost xx Equity:-

Cost of xxxxxx is defined xx xxx return xxxxx stockholders xxxxxxx on xxxxx xxxxxxxxxxxx xx xx xxx required rate of return xxx xxx xxxxxxxxxxx xxx it xx xxxx for xxx company. xxxx of xxxxxx can be calculated in xxx ways. xxxxxxxx valuation xxxxx and Capital Asset Pricing models are the ways xxxxxxx which xxxx of xxxxxx is xxxxxxxxxxx

xxxxxxxx xxx xxx xxxx the xxxxxx xxx xxxxx xxxxxxx

CAPM xxxxxxx

xxx = (Rm-Rf)*beta

xx x Market xxxxxx

Rf= Risk xxxx xxxxxx

xxxxxxxxxx

CAPM, defined at xxxxxxxxxxxxx Retrieved from xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Dividend xxxxxxxxx Model:-

k.e = xxxxxxxx xxx xxxxxxxxxxxxx xxxxxx xxxxx of stock + Growth rate of xxxxxxxxxx

xxxx of Debt:-

xxxxx are the xxxxxxxxx xxxxx xxxxxxx xxxxx to xxxxxxx the xxxxxxx therefore xxxx xxxx to xxx interest xx those borrowing. xx xxx cost xx xxxx is xxxx xxxxxxxx which company has to xxx on the borrowings xxx normally it xx taken after xxx xx xx xx xxx tax xxxxxxxxxx xxxxxxxx

Reference:

Cost

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file2.xls preview (37 words)

Sheet1

xxxxxxxxxx
Cost of xxxx
PVIF6
xxxxxxxx xxxxx xx xxxx formula
xxxxxxxxxxxxx
The x in PVIF formula xx 6.014772740410.50%
xxxx xx xxxxxx
xxxxxxxxxxxx15.5%
WACC xx xx used xx required rate of xxxxxx
Debt 600000 xxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxx 0.10857
2000000 14.0%

Sheet2

xxxxxx

x

file3.pptx preview (240 words)

xxxx xx xxxx

Cost of xxxx = Interest Payments

Definition

Debts are the borrowing xxxxx xxxxxxx xxxxx xx xxxxxxx xxx xxxxxxx xxxxxxxxx they have xx pay xxxxxxxx on xxxxx borrowing. So xxx cost xx xxxx is xxxx xxxxxxxx which xxxxxxx has xx pay on xxx borrowings and normally it xx taken xxxxx tax as xx is xxx tax deductible expense.

xxxxxxxxxxxx

Cost xx xxxx

PVIF

6

xxxxxxxx xxxx

x in xxxx formula

xxxxxxxxxxxxx

xxx x in xxxx xxxxxxx xx

xxxxxxxx

10.50%

xxxx xx xxxxxxxxxxxxx

xxxx xx equity = (Rm-Rf)*Beta

xxxx xx xxxxxxxxxxxxxxxx Valuation Model)

Cost of xxxxxx x Dividend per share/Current Market xxxxx xx xxxxx + Growth xxxx of xxxxxxxxxx

xxxxxxxxxx

xxxx of equity xx defined as xxx xxxxxx which xxxxxxxxxxxx xxxxxxx xx xxxxx xxxxxxxxxxxx xx is xxx xxxxxxxx xxxx of xxxxxx xxx xxx xxxxxxxxxxx xxx it is cost for the xxxxxxxx xxxx xx equity can xx calculated in xxx ways. xxxxxxxx valuation xxxxx xxx Capital xxxxx xxxxxxx models xxx the ways xxxxxxx which cost of xxxxxx is xxxxxxxxxxx

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Answer
Submitted by Alvin on Wed, 2013-09-18 22:18
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Assignment 2 Cost of Debt and Equity(Complete Answer With PowerPoint Presentation)

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xxxx assignment xx xxxxxxxxxxxxxxxx for purchasing xx this assignment!

file1.docx preview (342 words)

Cost xx xxxxxxxx

Cost of xxxxxx is xxxxxxx as the xxxxxx which xxxxxxxxxxxx require xx their investments. xx xx xxx xxxxxxxx rate xx return for xxx stockholder but it xx cost xxx the company. Cost of equity xxx be calculated xx xxx xxxxx xxxxxxxx xxxxxxxxx model xxx Capital xxxxx xxxxxxx models xxx the xxxx xxxxxxx which cost xx xxxxxx xx calculated.

xxxxxxxx for xxx xxxx the models xxx xxxxx below:-

CAPM xxxxxxx

k.e x (Rm-Rf)*beta

Rm x Market return

xxx xxxx free return

Reference:

CAPM, xxxxxxx at xxxxxxxxxxxxx Retrieved from xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxx xxxxxxxxx Model:-

xxx = Dividend xxx share/Current xxxxxx xxxxx xx xxxxx x xxxxxx xxxx of dividends.

Cost of Debt:-

Debts are the xxxxxxxxx which xxxxxxx takes xx xxxxxxx the company xxxxxxxxx they xxxx xx pay interest on those xxxxxxxxxx So xxx xxxx xx xxxx xx that interest which company has xx pay on the xxxxxxxxxx and normally it xx xxxxx xxxxx xxx xx it is xxx xxx deductible expense.

xxxxxxxxxx

Cost

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file2.xls preview (37 words)

xxxxxx

xxxxxxxxxxxxxxxx
xxxx xx Debt
xxxxx
Interest ratex in xxxx formula
xxxxxxxxxxxxx
xxx x xx PVIF formula xx6.0147727404xxxxxx
Cost of Equity
3+1.39(12-3) 15.5%
WACC xx be xxxx xx xxxxxxxx xxxx xx return
xxxx xxxxxx 10.50% 0.0315
xxxxxxx1400000 xxxxxxxxxxxx
2000000 xxxxx

xxxxxx

x

Sheet3

file3.pptx preview (240 words)

xxxx xx Debt

xxxx xx debt x xxxxxxxx xxxxxxxx

Definition

Debts are xxx xxxxxxxxx which company takes xx xxxxxxx xxx xxxxxxx xxxxxxxxx xxxx have to pay interest xx xxxxx xxxxxxxxxx So xxx cost of debt xx that interest which company has xx pay on the xxxxxxxxxx and xxxxxxxx it is taken after tax as xx is the xxx xxxxxxxxxx xxxxxxxxx

xxxxxxxxxxxx

xxxx xx xxxx

PVIF

x

xxxxxxxx rate

x in xxxx xxxxxxx

xxxxxxxxxxxxx

The x in xxxx formula xx

6.014773

10.50%

Cost of xxxxxxxxxxxxx

Cost xx xxxxxx = xxxxxxxxxxxxx

xxxx of Equity (Dividend xxxxxxxxx xxxxxx

Cost xx xxxxxx x Dividend per share/Current xxxxxx xxxxx xx stock + xxxxxx xxxx of xxxxxxxxxx

xxxxxxxxxx

xxxx xx equity is xxxxxxx xx xxx return xxxxx xxxxxxxxxxxx require on their investments. It xx the required xxxx of return for xxx stockholder but xx xx cost for the company. xxxx of equity xxx xx calculated xx xxx xxxxx Dividend valuation xxxxx and xxxxxxx Asset xxxxxxx models are the xxxx xxxxxxx xxxxx cost xx equity is xxxxxxxxxxx

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Submitted by Engineer Maxw... on Tue, 2015-02-03 05:06
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Cost of Debt

Cost xx debt x xxxxxxxx xxxxxxxx

xxxxxxxxxx

Debts xxx the borrowing which company takes to finance xxx company xxxxxxxxx they xxxx to xxx interest xx xxxxx xxxxxxxxxx So the xxxx of xxxx xx that interest xxxxx company has xx pay on the borrowings xxx normally it is taken xxxxx xxx xx xx is the xxx xxxxxxxxxx expense.

Calculations

Cost xx Debt

PVIF

6

Interest xxxx

x xx xxxx xxxxxxx

1-1/1+x^10)/x

xxx x xx PVIF xxxxxxx xx

xxxxxxxx

10.50%

Cost xx xxxxxxxxxxxxx

xxxx of xxxxxx = (Rm-Rf)*Beta

xxxx xx Equity (Dividend xxxxxxxxx Model)

xxxx of Equity x xxxxxxxx per share/Current xxxxxx xxxxx xx xxxxx x Growth rate xx dividends.

Definition

xxxx xx xxxxxx xx xxxxxxx xx xxx return xxxxx stockholders xxxxxxx on their xxxxxxxxxxxx xx is the required rate xx xxxxxx for the xxxxxxxxxxx but it xx cost xxx the company. Cost xx xxxxxx can xx xxxxxxxxxx xx xxx xxxxx xxxxxxxx valuation xxxxx xxx Capital Asset Pricing xxxxxx xxx xxx ways through xxxxx xxxx of xxxxxx xx xxxxxxxxxxx

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file2.xls preview (37 words)

Sheet1

xxxxxxxxxx
Cost of xxxx
PVIFx
Interest ratex xx PVIF formula
xxxxxxxxxxxxx
xxx x in PVIF xxxxxxx xxxxxxxxxxxxxx10.50%
xxxx xx Equity
3+1.39(12-3)15.5%
WACC xx be used xx required xxxx xx return
Debt 600000 10.50% 0.0315
Equitgy 1400000 xxxxx xxxxxxx
2000000 14.0%

xxxxxx

xxxxxx

x


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