Explain with examples how the cost of capital is determined

Assignment Help Financial Management
Reference no: EM131211624

Managing Finance - Argosy University

The Genesis Energy operations management team was excited to understand the various options for securing financing to fund the rapid growth plans. The team was surprised by the cost associated with using funds supplied by others after accounting for risk of investments in its small but profitable company. Sensible Essentials explained how the cost of external financing can be calculated.

· Explain with examples how the cost of capital is determined.

· Calculate the differences in cost and risk. Explain why the costs and risks of external financing are important for the organization to understand.

· Explain why rapid growth plans are important to a small company. Would there be a more efficient way to fund a growing company? Why or why not? Justify your answer.

Write your initial response in 300-500 words. Your response should be thorough and address all components of the discussion question in detail, include citations of all sources, where needed, according to the APA Style, and demonstrate accurate spelling, grammar, and punctuation.

Reference no: EM131211624

Questions Cloud

What is the products contribution margin ratio : JTL MANUFACTURING markets a simple water control and timer that it mass-produces. During 2013, the company sold 696,000 units at an average selling price of per solution $4.20 per unit. The variable expenses were $1,900,080, and the fixed expenses we..
Evaluate all realistic market entry options : In this assessment, you will continue to use the country and focus organisation you worked on in Asst 2. Here you will develop the next steps in their international marketing plan. Part 1 requires you to evaluate all realistic market entry options..
Estimate the price elasticity of demand for its product : Explain why it is important for a business to estimate the price elasticity of demand for its product?
Major public-park projects with comprehensive irrigation : JTL MANUFACTURING has two major public-park projects to provide with comprehensive irrigation in one of its service locations this month. Journalize the activities from these job cost sheets in the general journal. Also journalize the other costs tha..
Explain with examples how the cost of capital is determined : Explain with examples how the cost of capital is determined. Calculate the differences in cost and risk. Explain why the costs and risks of external financing are important for the organization to understand.
Change in the market for orange juice : Show the change in the market for orange juice that is consistent with the following statement: "When a cold snap hits Florida, the price of orange juice rises in supermarkets throughout the country."
What is the detection gain : An AM system has a message signal that has a zero-mean Gaussian amplitude distribution. The peak value of m (t) is taken as that value that m (t) exceeds 0.5% of the time. If the index is 0.7, what is the detection gain?
Return to the market failure : Response question: Return to the market failure you identified in week 2. What policy mechanism would be best to address it? Why would other mechanisms be inappropriate? Would there be potential side effects?
Develop and describe a strategic measurement scorecard : Develop and describe a strategic measurement "scorecard" that incorporates the financial measures applied in this course. Consider the prospect of new equity owners and explain why this is important.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the cost of preferred stock-risk-free rate

The 8.50 percent preferred stock of Ajax Unlimited is selling for $92.30 a share. What is the cost of preferred stock if the risk-free rate is 3.95 percent?

  What is discounted payback period for these cash flows

An investment project has annual cash inflows of $4,900, $3,400, $4,600, and $3,800, for the next four years, respectively. The discount rate is 13 percent. What is the discounted payback period for these cash flows if the initial cost is $5,200?

  What was the dividend yield for the year

The common stock of Acadia, Inc., sold for $32.90 at the beginning of the year and $33.12 at the end of the year. During the year, the stock paid $1.10 in dividends. What was the dividend yield for the year?

  What is annual rate of return with continuous compounding

The interest rates in Canada and the United States are 6% and 5% per annum, respectively, with continuous compounding. The spot price of the Canadian dollar is $0.8000.

  What was annual change in average selling price

In October 2012, the average house price in the United States was $208,600. In October 2004, the average price was $282,300. Required: What was the annual change in the average selling price?

  What are your call options worth and net profit

Suppose you purchase eight call contracts on Macron Technology stock. The strike price is $60, and the premium is $3.00. If at expiration, the stock is selling for $64 per share, what are your call options worth? What is your net profit?

  Concerning advantages of charitable remainder annuity trust

Which of the following statements concerning the advantages of the charitable remainder annuity trust over the charitable remainder unitrust is (are) correct?

  Which will the shareholders favor and the bondholders

The managers of a firm are asked to consider two possible new product lines for the firm. Project 1 is quite risky and may result in a market value for the firm of $50 million in two years, or nothing. What are the possible payoffs to the shareholder..

  An investor holds an aggressive growth mutual fund

An investor holds an aggressive growth mutual fund and was forced to sell it at an inop- portune time when the fund had lost a considerable amount of money. She is upset at being forced out of the fund and claims that this endangers her ability to me..

  Money deposited during a quarter will not earn any interest

Suppose you make $500 monthly deposits into a tax-deferred retirement plan that pays interest at a rate of 10% per year compound quarterly. Suppose that money deposited during a quarter will not earn any interest. What is the balance at the end of 20..

  Call option if it can be exercised prior to maturity

A call option on IBM has an exercise price of 100, the share price S is 120. The option will exprie in 6 months, and the riskfree rate is 10% p.a. and the historical variance of the returns of IBM is 12% p.a.   Before the option expires, IBM is expec..

  What are felton farm supplies annual sales

Felton Farm Supplies, Inc. has an ROA (return on assets) of 12 percent, total assets of $300,000 and a net profit margin of 4.5 percent. What are Felton Farm Supplies annual sales?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd