Reference no: EM131456944
Assignment: 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 Energy 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 calculations into your presentation. Include speaker's notes to explain each point in detail. Apply APA standards to citation of sources.
|
Find the optimal values of the economic ordering quantity
: The annual demand for an automobile component is 36,000 units. The carrying cost is ? 0.50/ unit/year, the ordering cost is 25.00 per order and the shortage.
|
|
Calculate the differences in cost and risk
: Calculate the differences in cost and risk. Explain why the costs and risks of external financing are important for the organization to understand.
|
|
National bureau of economic research
: National Bureau of Economic Research. CIA's World Factbook. Organizaiton for Economic Co-operation and Development.
|
|
Dividend or to let carlson invest the money
: what personal tax rate would make the investors equally willing to receive the dividend or to let Carlson invest the money?
|
|
Compute the expected rate of return on joness stock
: Debt: Jones Industries borrows $600,000 for 10 years with an annual payment of $100,000. Determine the expected rate of return on Jones's stock.
|
|
Determine change in hhi
: Suppose the two companies with 20% and 10% market shares. Determine change in HHI.
|
|
What did employee turnover cost ups and downs
: Ups and Downs, Inc., a 4,000-employee organization, has a serious turnover problem, and management has decided to estimate its annual cost to the company.
|
|
Participating in an independent private value auction
: Each bidder perceives that all other bidders valuations for the item are evenly distributed between $50000 and $80000.
|
|
What was his annual rate of return on this sculpture
: Although appealing to more refined tastes, art as a collectible has not always performed so profitably. What was his annual rate of return on this sculpture?
|