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.
Cost and Debt Equity(WORD+EXCEL+POWERPOINT) ATTACHED A+++Tutorial Use As Guide
body preview (0 words)
file1.xls preview (37 words)
|Cost xx Debt|
|xxxxxxxx xxxx||x in PVIF formula|
|xxx x xx PVIF xxxxxxx isx||xxxxxxxxxxxxx||10.50%|
|xxxx of Equity|
|xxxx to xx used as xxxxxxxx xxxx xx return|
file2.docx preview (342 words)
Cost xx xxxxxxxx
Cost of xxxxxx is defined as xxx return xxxxx xxxxxxxxxxxx xxxxxxx on xxxxx xxxxxxxxxxxx It is xxx required rate of xxxxxx xxx xxx stockholder but xx is xxxx xxx xxx company. Cost of xxxxxx xxx be xxxxxxxxxx in xxx xxxxx xxxxxxxx xxxxxxxxx xxxxx xxx Capital xxxxx xxxxxxx models are the xxxx through xxxxx cost xx equity xx calculated.
xxxxxxxx xxx the xxxx the models are xxxxx below:-
k.e x xxxxxxxxxxxx
xx x Market xxxxxx
xxx xxxx free return
xxxxx defined at xxxxxxxxxxxx. Retrieved xxxx http://www.investopedia.com/terms/c/capm.asp
xxxxxxxx xxxxxxxxx Model:-
xxx x Dividend per share/Current xxxxxx value xx xxxxx + Growth xxxx xx dividends.
xxxx xx Debt:-
xxxxx xxx xxx borrowing which xxxxxxx takes to xxxxxxx xxx xxxxxxx xxxxxxxxx they xxxx xx pay interest xx those xxxxxxxxxx xx xxx xxxx of debt is that xxxxxxxx xxxxx xxxxxxx has to xxx xx xxx xxxxxxxxxx and xxxxxxxx it is xxxxx xxxxx tax as xx xx the xxx deductible xxxxxxxx
- - - more text follows - - -
file3.pptx preview (240 words)
Cost of Debt
xxxx xx debt x xxxxxxxx xxxxxxxx
Debts are the xxxxxxxxx which xxxxxxx xxxxx to finance xxx company therefore xxxx xxxx xx pay interest on xxxxx borrowing. So the cost of debt is that xxxxxxxx xxxxx company has xx xxx xx the borrowings and normally it xx xxxxx xxxxx xxx xx it xx xxx xxx xxxxxxxxxx xxxxxxxxx
xxxx of Debt
x in xxxx xxxxxxx
The x in PVIF xxxxxxx is
Cost of Equity (CAPM)
xxxx xx xxxxxx x (Rm-Rf)*Beta
xxxx of Equity (Dividend Valuation Model)
Cost of xxxxxx x xxxxxxxx per xxxxxxxxxxxxx Market xxxxx of xxxxx + xxxxxx xxxx of dividends.
Cost of xxxxxx xx defined xx xxx xxxxxx xxxxx stockholders require xx xxxxx xxxxxxxxxxxx xx is the xxxxxxxx xxxx of return for the xxxxxxxxxxx xxx xx is xxxx xxx the company. Cost xx equity xxx xx xxxxxxxxxx in two ways. xxxxxxxx xxxxxxxxx model and Capital Asset xxxxxxx xxxxxx xxx the ways xxxxxxx xxxxx cost of equity xx xxxxxxxxxxx
- - - more text follows - - -
Try it before you buy it