How firms should analyze their cost of capital
Course:- Finance Basics
Reference No.:- EM131536856

Assignment Help
Assignment Help >> Finance Basics

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


Long- & short-term debt


Common internal stock equity


New common stock equity


Total liabilities & equity


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.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Finance Basics) Materials
You are considering the following two mutually exclusive projects. The required return on each project is 14 percent. Which project should you accept and what is the best re
Your investment banking firm has estimated what your new issue of bonds is likely to sell for under several different economic conditions. What is the expected (average) sel
Contact your local office of emergency management and find out if there is an evacuation plan for your local community. What must occur for an evacuation to be ordered? Who
Using the high-low method, estimate the fixed cost of electricity per month and the variable cost of electricity per occupancy-day. Round off the fixed cost to the nearest who
Your boss has again asked for your help. He needs to figure out the holding period yield on a candidate bond for inclusion in a pension bond portfolio and whether your compa
Engstrom Company began fiscal 2013 with a $40,000 balance in Retained Earnings. During 2013, its net income was $167,890 and it declared and paid dividends of $50,000. What
Prepare a report for the director, carefully addressing the following issues: an analysis of the structure of the current financial system in Australia; structure of and devel
Martinez Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufactur