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Wk4 Assignment

Posted on April 5, 2018 Updated on April 5, 2018

The manager of Sensible Essential Consulting 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:

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 calculations  into your presentation. Include speaker’s notes to explain each point in  detail. Apply APA standards to citation of sources.

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