Finance Organization and Long-Term Planning

Fin" rel="nofollow">inance Organization and Long-Term Plannin" rel="nofollow">ing Order Description Considerin" rel="nofollow">ing Genesis Energy’s aggressive growth plan, Sensible Essentials suggested that its client should broaden the scope of fin" rel="nofollow">inancin" rel="nofollow">ing beyond short-term loans and consider long-term fin" rel="nofollow">inancin" rel="nofollow">ing options. These options would greatly enhance the ability of the operations management team to fund the capital in" rel="nofollow">investments and growth in" rel="nofollow">in operatin" rel="nofollow">ing expenses. One option is sellin" rel="nofollow">ing more equity in" rel="nofollow">in the company. A public stock offerin" rel="nofollow">ing might be a possibility; however, a company as young and small as Genesis Energy might be hard to value. Sensible Essentials believes that another private in" rel="nofollow">investor might require preferred stock dividends in" rel="nofollow">in order to mitigate some of the fin" rel="nofollow">inancial risk. Another option is a long-term bank loan. Actin" rel="nofollow">ing as the fin" rel="nofollow">inance expert for Sensible Essentials, respond to the followin" rel="nofollow">ing: •Determin" rel="nofollow">ine the cost of debt and equity for Genesis Energy and its weighted average cost of capital. Go to www.yahoofin" rel="nofollow">inance.com and look under SEC filin" rel="nofollow">ings. Use a US publicly traded company, such as Apple, Google, DuPont, etc. •Identify the sources of long-term fin" rel="nofollow">inancin" rel="nofollow">ing for Genesis Energy. •Analyze the potential costs and benefits of each option. •Explain" rel="nofollow">in how relative risk (from the in" rel="nofollow">investor’s perspective) impacts the cost of capital for Genesis Energy. •Determin" rel="nofollow">ine the cost of debt and equity for Genesis Energy and its weighted average cost of capital. •Calculate the required rate of return for Genesis Energy usin" rel="nofollow">ing the capital asset p