# 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 $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**.

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

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# xxxxxx

xxxxxxxxxxxxxCost xx Debt | |||

xxxx | 6 | ||

xxxxxxxx xxxx | x in PVIF formula | ||

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

xxx x xx PVIF xxxxxxx is | xxxxxxxxxxxx | 10.50% | |

xxxx of Equity | |||

3+1.39(12-3) | xxxxx | ||

xxxx to xx used as xxxxxxxx xxxx xx return | |||

xxxx | xxxxxx | 10.50% | xxxxxx |

xxxxxxx | xxxxxxx | 15.5% | 0.10857 |

2000000 | 14.0% |

# xxxxxx

x# Sheet3

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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:-

CAPM xxxxxxx

k.e x xxxxxxxxxxxx

xx x Market xxxxxx

xxx xxxx free return

Reference:

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

xxxxxxxxxx

Cost

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Cost of Debt

xxxx xx debt x xxxxxxxx xxxxxxxx

xxxxxxxxxx

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

xxxxxxxxxxxx

xxxx of Debt

xxxx

6

Interest rate

x in xxxx xxxxxxx

xxxxxxxxxxxxx

The x in PVIF xxxxxxx is

xxxxxxxx

10.50%

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.

xxxxxxxxxx

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

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## A++ Answer

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## Assignment 2 Cost of Debt and Equity(Complete Answer With PowerPoint Presentation)

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Your xxxxxxxxxx xx attached..Thanks for purchasing xx this assignment!

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Cost xx xxxxxxxx

Cost of equity is defined as xxx return which xxxxxxxxxxxx xxxxxxx on their xxxxxxxxxxxx It xx xxx required xxxx xx xxxxxx for xxx xxxxxxxxxxx xxx xx is xxxx xxx the xxxxxxxx Cost of xxxxxx can be calculated in xxx xxxxx xxxxxxxx valuation xxxxx xxx xxxxxxx xxxxx xxxxxxx xxxxxx are the ways xxxxxxx xxxxx cost xx equity xx xxxxxxxxxxx

xxxxxxxx xxx xxx xxxx xxx xxxxxx are given below:-

xxxx Model:-

xxx = (Rm-Rf)*beta

Rm = xxxxxx xxxxxx

Rf= xxxx xxxx return

xxxxxxxxxx

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

Dividend Valuation xxxxxxx

xxx x xxxxxxxx per share/Current xxxxxx xxxxx of xxxxx + Growth xxxx of dividends.

xxxx xx Debt:-

Debts xxx the borrowing xxxxx xxxxxxx xxxxx to finance the company therefore they have xx pay xxxxxxxx on those xxxxxxxxxx xx xxx xxxx of debt is xxxx xxxxxxxx which company xxx xx pay xx xxx xxxxxxxxxx xxx xxxxxxxx xx xx taken after tax as it is xxx tax deductible xxxxxxxx

xxxxxxxxxx

Cost

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# xxxxxx

xxxxxxxxxxxxxxxxxCost xx xxxx | |||

xxxx | 6 | ||

xxxxxxxx rate | x in PVIF xxxxxxx | ||

xxxxxxxxxxxxx | |||

The x xx xxxx formula is | 6.0147727404 | xxxxxx | |

Cost xx Equity | |||

xxxxxxxxxxxx | 15.5% | ||

xxxx xx xx xxxx xx xxxxxxxx rate xx xxxxxx | |||

Debt | 600000 | xxxxxx | 0.0315 |

Equitgy | 1400000 | xxxxx | 0.10857 |

xxxxxxx | 14.0% |

# Sheet2

x# xxxxxx

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Cost of xxxx

Cost of xxxx = xxxxxxxx Payments

xxxxxxxxxx

Debts xxx xxx borrowing which xxxxxxx takes to xxxxxxx xxx company xxxxxxxxx they have to pay interest xx those xxxxxxxxxx xx xxx cost xx xxxx xx that xxxxxxxx which xxxxxxx xxx xx pay on xxx xxxxxxxxxx xxx normally it xx xxxxx after xxx xx it xx the tax deductible xxxxxxxxx

Calculations

Cost of xxxx

xxxx

x

Interest rate

x xx xxxx xxxxxxx

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

The x xx xxxx xxxxxxx is

xxxxxxxx

10.50%

xxxx of xxxxxxxxxxxxx

xxxx of xxxxxx = xxxxxxxxxxxxx

Cost xx Equity (Dividend Valuation xxxxxx

xxxx xx xxxxxx x xxxxxxxx xxx xxxxxxxxxxxxx xxxxxx value xx xxxxx + xxxxxx xxxx xx xxxxxxxxxx

xxxxxxxxxx

Cost xx xxxxxx is defined as xxx xxxxxx xxxxx stockholders xxxxxxx on xxxxx xxxxxxxxxxxx xx is the xxxxxxxx rate of return for xxx stockholder xxx xx xx cost for xxx company. Cost of xxxxxx can xx xxxxxxxxxx in two xxxxx Dividend xxxxxxxxx xxxxx and Capital xxxxx xxxxxxx xxxxxx xxx xxx ways through which xxxx of xxxxxx is calculated.

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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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## A++ PERFECTLY DONE

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Cost xx xxxx

Cost of xxxx = xxxxxxxx xxxxxxxx

Definition

xxxxx are the borrowing which xxxxxxx takes to finance the company xxxxxxxxx they have to xxx xxxxxxxx on those xxxxxxxxxx xx xxx xxxx xx debt xx xxxx interest which xxxxxxx has to pay xx the borrowings and xxxxxxxx it xx xxxxx xxxxx tax as xx xx xxx xxx xxxxxxxxxx expense.

Calculations

xxxx of xxxx

xxxx

6

xxxxxxxx rate

x in PVIF formula

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

The x in PVIF formula is

xxxxxxxx

xxxxxx

xxxx of Equity (CAPM)

Cost of xxxxxx = xxxxxxxxxxxxx

xxxx of Equity (Dividend Valuation xxxxxx

Cost of Equity x xxxxxxxx xxx xxxxxxxxxxxxx xxxxxx xxxxx xx xxxxx x Growth rate xx xxxxxxxxxx

Definition

Cost of xxxxxx is xxxxxxx xx xxx xxxxxx xxxxx xxxxxxxxxxxx require xx xxxxx xxxxxxxxxxxx xx is xxx required xxxx xx return xxx the xxxxxxxxxxx xxx it is xxxx xxx xxx company. xxxx of xxxxxx can xx xxxxxxxxxx in two ways. xxxxxxxx xxxxxxxxx model xxx Capital xxxxx xxxxxxx models are xxx xxxx through which xxxx of xxxxxx is xxxxxxxxxxx

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# xxxxxx

xxxxxxxxxxxxxxxxCost xx xxxx | |||

xxxx | x | ||

xxxxxxxx rate | x xx xxxx formula | ||

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

The x xx xxxx formula xx | 6.0147727404 | xxxxxx | |

Cost of xxxxxx | |||

3+1.39(12-3) | xxxxx | ||

xxxx xx be used xx xxxxxxxx xxxx of return | |||

xxxx | 600000 | xxxxxx | xxxxxx |

xxxxxxx | 1400000 | xxxxx | 0.10857 |

xxxxxxx | xxxxx |

# xxxxxx

x# Sheet3

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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 xxxxxxxxxxxx*x 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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# Sheet1

xxxxxxxxxxCost of xxxx | |||

PVIF | 6 | ||

xxxxxxxx xxxx | x xx xxxx formula | ||

xxxxxxxxxxxxx | |||

The x in PVIF formula xx | 6.0147727404 | 10.50% | |

xxxx xx xxxxxx | |||

xxxxxxxxxxxx | 15.5% | ||

WACC xx xx used xx required rate of xxxxxx | |||

Debt | 600000 | xxxxxx | xxxxxx |

xxxxxxx | xxxxxxx | xxxxx | 0.10857 |

2000000 | 14.0% |

# Sheet2

# xxxxxx

xfile3.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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## B6022 Module 4 Assignment 2 Cost of Debt and Equity

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B6022 Module x Assignment 2 xxxx of xxxx and Equity

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xxxx of xxxx xxx Equity

xxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 4 Assignment xx

xxxxxx

Jones WACC Cost of Debt Cost of Equity Cost xx xxx xxxxxx

Jones Weighted xxxxxxx xxxx of Capital

xxxx xx xxxx

Cost xx xxxxxx

Cost xx xxxxxx xxxxxxxxxxx

Cost of New xxxxxx

Cost xx xxx Equity xxxxxxxxxxxx

xxxxxxx

xxxxxxxxx xx xxx WACC, xxxxx xxxxxxxxxx can manage xxxxx xxxxxxxxxxx the beta is greater than 1, Jones xxxxxxxxxx xxx xxxxxxxx higher than xxx market Capital xxxx xx xxxx to generate xx an xxxxxxxxxx xxxx

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