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# Assignment 2: Cost of Debt and Equity

Assignment 2: Cost of Debt and Equity

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 \$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.

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## Cost and Debt Equity(WORD+EXCEL+POWERPOINT) ATTACHED A+++Tutorial Use As Guide

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Cost xx xxxxxxxx

Cost xx xxxxxx is xxxxxxx xx xxx xxxxxx which xxxxxxxxxxxx xxxxxxx on their xxxxxxxxxxxx It is xxx required xxxx of xxxxxx xxx xxx xxxxxxxxxxx but xx xx cost xxx the company. Cost xx equity xxx xx xxxxxxxxxx in two ways. xxxxxxxx valuation model xxx xxxxxxx xxxxx Pricing xxxxxx xxx the xxxx xxxxxxx xxxxx xxxx xx equity is calculated.

xxxxxxxx for xxx xxxx the xxxxxx xxx xxxxx below:-

xxxx Model:-

xxx x xxxxxxxxxxxx

xx = xxxxxx xxxxxx

Rf= xxxx free return

xxxxxxxxxx

CAPM, xxxxxxx xx investopedia. xxxxxxxxx xxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxx xxxxxxxxx Model:-

xxx = xxxxxxxx xxx share/Current xxxxxx value of stock + xxxxxx rate xx xxxxxxxxxx

xxxx xx xxxxxx

xxxxx xxx the borrowing xxxxx company takes xx finance xxx company xxxxxxxxx xxxx xxxx to xxx interest xx those borrowing. So the xxxx of debt xx xxxx xxxxxxxx xxxxx company has xx pay xx xxx xxxxxxxxxx and normally xx is xxxxx after tax xx xx is xxx tax deductible xxxxxxxx

Reference:

Cost

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file2.pptx preview (240 words)

xxxx xx Debt

Cost xx debt = Interest Payments

Definition

xxxxx xxx the xxxxxxxxx which company xxxxx xx xxxxxxx xxx company xxxxxxxxx they xxxx to xxx xxxxxxxx on xxxxx borrowing. xx xxx xxxx of xxxx xx that xxxxxxxx xxxxx xxxxxxx has xx pay xx the xxxxxxxxxx xxx xxxxxxxx xx xx xxxxx xxxxx tax xx xx is xxx xxx xxxxxxxxxx expense.

xxxxxxxxxxxx

xxxx xx xxxx

xxxx

x

Interest rate

x in PVIF xxxxxxx

xxxxxxxxxxxxx

The x in PVIF xxxxxxx is

xxxxxxxx

xxxxxx

xxxx xx xxxxxxxxxxxxx

Cost xx equity = (Rm-Rf)*Beta

Cost of xxxxxxxxxxxxxxxx xxxxxxxxx xxxxxx

xxxx xx Equity x Dividend xxx xxxxxxxxxxxxx Market value xx xxxxx + xxxxxx xxxx of xxxxxxxxxx

xxxxxxxxxx

xxxx of xxxxxx xx xxxxxxx as xxx xxxxxx which stockholders require on xxxxx investments. xx xx xxx required xxxx of return xxx xxx xxxxxxxxxxx but it is cost for the xxxxxxxx Cost xx equity xxx be xxxxxxxxxx xx two xxxxx xxxxxxxx valuation xxxxx xxx xxxxxxx Asset Pricing models xxx the ways xxxxxxx xxxxx cost xx equity is xxxxxxxxxxx

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## Cost of debt and equity

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xxxxxx xxxx thank xxx

file1.ppt preview (269 words)

xxxx of Debt and xxxxxxx  Name:   Course:   xxxxxxxxxxxx  xxxxxxxxxxxxx  xxxx of Submission *

1. Formula similar xx that xx calculating xxxxxxxx xxxxxxxxxx

The formula xxxxxxx xxxx xxx rate does xxx xxxxxx xxxx xxxx xx xxxx xxxx amount xxxx xx xxxx over xxxx period *

xxx ordinary xxxxxxx xx xxxx xx xxx end xx xxxxx a finance. The user xxxx for having used xx opposed to annuity xxx paid xxx intending xx xxxxxx

xxxxxxxxx cost xx debt using xxxxxxxxx x r xxxxxxxxxxxxxxxxx x Payment PV x Present xxxxxxx x xxxx per xxxxxxxx x number of periods *

xxxxxxxxxxxxxxxxxx xxxxxxxxxx xxxxxxxxx xxxxxxx xx xxxxxx xxxxxxxxx xxxx + xxxx (Risk xxxxxxxxx xxxxx xxxx xxxxxxx = xxxxxxxx xxxxxx xx xxx xxxxxxx market x xxxxxxxxx xxxx xx

xxxxxxxxxxxxx x 15.5% xxxxx weighted xxxxxxx xxxx xx xxxxxxx which is xxxxx as: xxxx = xx xxxxxxxxx x [(D/V)*Rd*(1-Tc)]} xx

Where: xx market value xx xxx xxxx’s equity xx xxxxxx xxxxx of the xxxx’s debt *

Re= xxxx xx xxxxxx xxx cost of xxxx xx E x x xxxx

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## 100% correct answer A+++++++++++++++++++TUTORIAL GUARANTEED PERFECT perfect calculations

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# xxxxxx

xxxxxxxxxxxxxxxxxxxxxxx
 Solution: Calculating xxxx of xxxx xx x xxxxxx xxx = 100000 xxxxxxxx rate = 16.67% Calculating cost xx xxxxxx xxxxx CAPM xxxxx xxxx xxxx xxxx free xxxx = xx xxxxxxxx return x xxx xxxxx xxxx xxxxx xxxx xx equity x Risk free xxxx + Beta x (Expected xxxxxx x xxxx xxxx xxxxx = 3%+1.39*(12%-3%) x 15.51% xxxxx xxxxx xxxxx xxxxx Assets \$2,000,000 xxxxx & xxxxxxxxxx debt xxxxxxxx xxxxxx internal stock xxxxxx \$400,000 New common xxxxx xxxxxx xxxxxxxxxx xxxxx xxxxxxxxxxx & equity \$2,000,000 xxxxx Debt x \$600,000.00 xxxxx equity x xxxxxxxxxxxxx xxxxx xxxxxxxxxxxxx Calculating xxxxxxx Debt 30.00% xxxxxx xxxxxx xxxx = xxxxxx

# xxxxxx

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xxxxxxxx RATE OF xxxxxxxxx xxx expected xxxx of xxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxx

xxxxxxxx xxxx xx return The expected xxxx xx xxxxxx xx the xxxxx xxxx xx xxxxxxxxxxx on xxxxxxxxxx within x specified period of time The xxxxxxxx xxxx xx return can xxxx xx xxxxxxxx to xx xxx discount xxxxxxxxx xxxxxx xxxxxxxxx can xxxx companies xx xxxxxxx the xxxxx xx their investment xxxx time. In xxxxx xxxxx xx xxxxxx xx xxx element of xxx xxxxxx xxxxx xx money

xxxxxxxxxxxxxxxx expected rate of return xxx xxxxxx at xxxxxxx xxxxxx xx xx xxxxx and annual payment xx 100000 xxx xxxxx because xxx xxxx xx xxx xxxx is xxx xxxxxxxx xxxx xxxx corresponds to 600000 in xxx xxxxxxxxxx annual xxxxxxx xx xxxxxxxxxxxx are xxxxxxxx values that can be used xxx example if xxx xxxxx xxx borrowed xx 14%, xx the xxxx period, then xxxxxx xxxxxxx will be 115,028. From this xxx xxxxxxxx xxxxxxxx for xxxxxx xxxxxx xxxxxxxx should xx lower.

xxxxxxxxxx expected rates xxx

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## Cost of Debt and Equity(Complete Answer With PowerPoint Presentation)

body preview (10 words)

Your xxxxxxxxxx is xxxxxxxxxxxxxxxx xxx purchasing my xxxx xxxxxxxxxxx

file1.docx preview (342 words)

xxxx of xxxxxxxx

xxxx xx xxxxxx xx xxxxxxx xx the xxxxxx which stockholders require xx xxxxx investments. It is the xxxxxxxx rate of return for the xxxxxxxxxxx but it is cost for xxx xxxxxxxx Cost xx equity xxx be calculated in two xxxxx Dividend valuation model and xxxxxxx Asset xxxxxxx xxxxxx xxx xxx ways through which cost of xxxxxx xx calculated.

Formulas xxx the xxxx the xxxxxx are xxxxx below:-

xxxx Model:-

xxx = (Rm-Rf)*beta

xx x Market xxxxxx

Rf= xxxx free return

xxxxxxxxxx

CAPM, defined at xxxxxxxxxxxx. xxxxxxxxx xxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxx xxxxxxxxx Model:-

xxx x xxxxxxxx per xxxxxxxxxxxxx Market value xx xxxxx x Growth xxxx of xxxxxxxxxx

Cost xx xxxxxx

xxxxx xxx xxx borrowing which xxxxxxx xxxxx to xxxxxxx the company therefore xxxx have to xxx interest xx those borrowing. xx the cost xx debt is xxxx interest which company xxx to pay on the borrowings and xxxxxxxx xx xx taken xxxxx tax as it is xxx tax deductible expense.

xxxxxxxxxx

Cost

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# Sheet1

xxxxxxxxxxxxxx
 xxxx xx Debt PVIF x xxxxxxxx xxxx x in xxxx xxxxxxx 1-1/1+x^10)/x xxx x in xxxx xxxxxxx is xxxxxxxxxxxx 10.50% Cost of Equity xxxxxxxxxxxx 15.5% WACC xx xx xxxx xx required xxxx of xxxxxx xxxx xxxxxx xxxxxx 0.0315 xxxxxxx 1400000 xxxxx xxxxxxx 2000000 xxxxx

# xxxxxx

x

file3.pptx preview (240 words)

xxxx xx Debt

Cost xx xxxx x xxxxxxxx xxxxxxxx

xxxxxxxxxx

Debts are the borrowing xxxxx company xxxxx xx xxxxxxx xxx xxxxxxx therefore they have to pay xxxxxxxx on those borrowing. So xxx cost of debt xx xxxx xxxxxxxx xxxxx company has xx xxx on the borrowings xxx xxxxxxxx it is taken xxxxx tax xx xx xx xxx xxx deductible xxxxxxxxx

Calculations

Cost xx Debt

xxxx

x

Interest xxxx

x xx PVIF xxxxxxx

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

xxx x in PVIF xxxxxxx is

xxxxxxxx

10.50%

xxxx xx xxxxxxxxxxxxx

Cost of xxxxxx = (Rm-Rf)*Beta

xxxx xx Equity (Dividend Valuation xxxxxx

xxxx of xxxxxx x xxxxxxxx per xxxxxxxxxxxxx xxxxxx xxxxx of xxxxx x xxxxxx xxxx xx xxxxxxxxxx

Definition

xxxx xx xxxxxx is xxxxxxx as the return which stockholders xxxxxxx xx their xxxxxxxxxxxx It is the required rate of xxxxxx xxx xxx xxxxxxxxxxx but xx xx cost for the company. Cost xx equity xxx xx xxxxxxxxxx xx xxx ways. xxxxxxxx xxxxxxxxx xxxxx and xxxxxxx Asset xxxxxxx xxxxxx xxx xxx xxxx through xxxxx xxxx of xxxxxx xx xxxxxxxxxxx

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## http://www.homeworkmarket.com/content/assignment-2-cost-debt-and-equity

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## A++ PERFECTLY DONE

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xxxx xx Debt

xxxx xx xxxx x Interest Payments

xxxxxxxxxx

Debts are xxx borrowing xxxxx company xxxxx xx finance xxx xxxxxxx therefore they xxxx to xxx xxxxxxxx xx xxxxx borrowing. xx the xxxx xx debt xx that interest which company xxx to xxx xx the xxxxxxxxxx xxx normally it xx xxxxx after tax as xx is the tax deductible xxxxxxxxx

xxxxxxxxxxxx

xxxx of Debt

PVIF

x

xxxxxxxx xxxx

x xx PVIF formula

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

xxx x xx xxxx xxxxxxx xx

6.014773

xxxxxx

xxxx of xxxxxxxxxxxxx

Cost xx xxxxxx = (Rm-Rf)*Beta

xxxx of xxxxxxxxxxxxxxxx xxxxxxxxx xxxxxx

xxxx xx Equity x Dividend xxx xxxxxxxxxxxxx Market value of stock + xxxxxx rate xx xxxxxxxxxx

Definition

Cost of equity xx xxxxxxx xx xxx xxxxxx xxxxx xxxxxxxxxxxx require xx their xxxxxxxxxxxx It xx xxx required rate xx return xxx xxx stockholder but xx xx cost xxx the company. xxxx xx equity xxx be calculated in two ways. xxxxxxxx valuation xxxxx and Capital Asset xxxxxxx models are the xxxx through xxxxx cost of xxxxxx is calculated.

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# xxxxxx

xxxxxxxxxxxxxxx
 Cost of Debt xxxx x Interest xxxx x in PVIF formula xxxxxxxxxxxxx xxx x in PVIF formula xx 6.0147727404 xxxxxx Cost xx Equity 3+1.39(12-3) xxxxx WACC xx xx xxxx xx xxxxxxxx xxxx of return xxxx 600000 10.50% xxxxxx Equitgy 1400000 15.5% xxxxxxx 2000000 14.0%

# Sheet3

x

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## Assignment 2 Cost of Debt and Equity*****Already A++ Rated Tutorial Use as Guide Paper*****

body preview (6 words)

xxxxxxxxxx x xxxx xx xxxx and Equity

file1.docx preview (342 words)

Cost of Equity:-

xxxx xx xxxxxx xx defined as the xxxxxx which stockholders xxxxxxx on their xxxxxxxxxxxx xx is xxx xxxxxxxx xxxx xx xxxxxx xxx xxx xxxxxxxxxxx xxx xx is xxxx xxx the company. Cost of xxxxxx can xx calculated in two xxxxx xxxxxxxx valuation model xxx Capital xxxxx Pricing models xxx the xxxx xxxxxxx xxxxx xxxx of xxxxxx is calculated.

xxxxxxxx for xxx xxxx the xxxxxx xxx xxxxx below:-

CAPM Model:-

xxx = (Rm-Rf)*beta

Rm = xxxxxx return

Rf= Risk free xxxxxx

Reference:

CAPM, xxxxxxx xx investopediax Retrieved from http://www.investopedia.com/terms/c/capm.asp

Dividend xxxxxxxxx xxxxxxx

xxx = xxxxxxxx xxx xxxxxxxxxxxxx xxxxxx value of xxxxx + Growth xxxx of xxxxxxxxxx

xxxx of xxxxxx

Debts are the borrowing xxxxx xxxxxxx takes xx finance xxx xxxxxxx therefore they xxxx to pay interest on those xxxxxxxxxx So the xxxx of debt is xxxx interest which company has to xxx on xxx borrowings and normally it is xxxxx xxxxx xxx as xx is xxx xxx xxxxxxxxxx xxxxxxxx

xxxxxxxxxx

xxxx

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# Sheet1

xxxxxxxxxx
 Cost of Debt xxxx 6 xxxxxxxx xxxx x in PVIF formula xxxxxxxxxxxxx The x in xxxx xxxxxxx is 6.0147727404 10.50% xxxx xx Equity xxxxxxxxxxxx xxxxx WACC to xx xxxx xx required rate of xxxxxx xxxx xxxxxx 10.50% 0.0315 Equitgy 1400000 15.5% 0.10857 xxxxxxx 14.0%

# xxxxxx

file3.pptx preview (240 words)

xxxx of Debt

xxxx xx debt x Interest xxxxxxxx

xxxxxxxxxx

Debts are the borrowing xxxxx xxxxxxx takes to finance the xxxxxxx therefore they have xx xxx interest xx xxxxx xxxxxxxxxx So xxx cost xx xxxx xx xxxx interest xxxxx xxxxxxx has xx pay on xxx xxxxxxxxxx and normally it is taken after xxx xx xx is the xxx deductible expense.

xxxxxxxxxxxx

xxxx xx xxxx

PVIF

x

xxxxxxxx rate

x xx xxxx xxxxxxx

xxxxxxxxxxxxx

The x in PVIF xxxxxxx xx

xxxxxxxx

10.50%

xxxx xx xxxxxxxxxxxxx

Cost of equity x (Rm-Rf)*Beta

Cost of xxxxxxxxxxxxxxxx xxxxxxxxx Model)

xxxx of xxxxxx x Dividend per share/Current Market value xx stock x Growth rate of xxxxxxxxxx

xxxxxxxxxx

xxxx xx xxxxxx is defined xx the xxxxxx xxxxx xxxxxxxxxxxx require xx xxxxx investments. xx xx the required xxxx xx xxxxxx for xxx stockholder but xx xx cost for the company. xxxx xx xxxxxx xxx xx xxxxxxxxxx xx xxx xxxxx Dividend valuation model xxx Capital Asset xxxxxxx xxxxxx xxx xxx ways through xxxxx cost xx equity xx calculated.

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## Cost of Debt and Equity

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Cost of xxxx and xxxxxx

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# xxxx of Debt and Equity/Cost xx Capital.pptx

xxxx of xxxxxxx

Cost of capital

xxxxxxxx xxxxxxx xxxx of capital is an xxxxxxxxx xxxxxx which xxxxxxxxx the cost of xxxxxxxxx xxxxxxx xxxxxxxxx components held xx the firm Debt Common xxxxxxxxxxxxxxxx equity. Higher xxx xxxx of xxxxxxxx lower xx xxx xxxxx of xxx firm.

xxxxxxxx Average cost xx xxxxxxx xx xx important xxxxxx xxxxx xxxxxxxxx xxx cost of xxxxxxxxx capital xxxxxxxxx components held xx xxx firm. It xxxxxxxxxx the xxxxxxx opportunity cost that the xxxxxxx xxx if the company invests xx xxxx project. The xxxxx capital xxxxxxxxx components xx xxx corporations includes: Debt Common equity Preferred xxxxxxxxxxxxxx the cost xx capital, xxxxx is the value of the firm.

x

xxxxxxx

xxx xxxxxxxx average xxxx xx xxxxxxx is calculated by calculating the xxxxxxx of xxx xxxxxxxxx capital structure components to the individual costs. xxx weight xx the xxxxxxx xxxxxxxxx is xxxxxxx determined xx xxx market xxxxx of the xxxxxxxxx

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