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.
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. Using the readings for the module, University online library resources, the Internet, and the sources you identified in Module 3, do the following: 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. By Saturday, October 22, 2015, post your response to the appropriateDiscussion Area. Through Wednesday, October 25, 2015, review and comment on at least two peers’ responses. 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 Do the following when responding to your peers: Read your peers’ answers. Provide substantive comments by contributing new, relevant information from course readings, Web sites, or other sources; building on the remarks or questions of others; or sharing practical examples of key concepts from your professional or personal experiences Respond to feedback on your posting and provide feedback to other students on their ideas. Make sure your writing is clear, concise, and organized; demonstrates ethical scholarship in accurate representation and attribution of sources; and displays accurate spelling, grammar, and punctuation. Grading Criteria Assignment Components Max Points Initial response was: Insightful, original, accurate, and timely. Substantive and demonstrated advanced understanding of concepts. Compiled/synthesized theories and concepts drawn from a variety of sources to support statements and conclusions. 16 Discussion Response and Participation: Responded to a minimum of two peers in a timely manner. Offered points of view supported by research. Asked challenging questions that promoted discussion. Drew relationships between one or more points in the discussion. 16 Writing: Wrote in a clear, concise, formal, and organized manner.Responses were error free. Information from sources, where applicable, was paraphrased appropriately and accurately cited. 8 Total: 40