Cost of Debt and Equity
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 9-11 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.