Reference no: EM13393431

A. When the Genesis and Sensible Essential teams held their weekly meeting, the time value of money and its applicability yielded an extremely stimulating discussion. However, most of the team members from Genesis were very perplexed. Sensible Essentials decided the most expedient way to demonstrate how interest rates as well as time impact the value of money was to use examples. You have been asked to prepare a report analyzing your findings of the three example calculations listed below.

In this assignment, you will do the following:

1. Calculate the future value of $100,000 ten years from now based on the following annual interest rates:
   1. 2%
   2. 5%
   3. 8%
   4. 10%

1. Calculate the present value of a stream of cash flows based on a discount rate of 8%. Annual cash flow is as follows:
   1. Year 1 = $100,000
   2. Year 2 = $150,000
   3. Year 3 = $200,000
   4. Year 4 = $200,000
   5. Year 5 = $150,000
   6. Years 6-10 = $100,000

1. Calculate the present value of the cash flow stream in problem 2 with the following interest rates:
   1. Year 1 = 8%
   2. Year 2 = 6%
   3. Year 3 = 10%
   4. Year 4 = 4%
   5. Year 5 = 6%
   6. Years 6-10 = 4

Perform your calculations in an Excel spreadsheet. Copy the calculations in a Word document. In addition, write a 2- to 3-page executive summary in Word format. Your summary should reflect a proper analysis of your findings, including a comparison and contrast of data.

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