Comment this discussion : Sources of long term finances for Genesis Energy may be money market securities,...

60.1K

Verified Solution

Question

Finance

Comment this discussion :
Sources of long term finances for Genesis Energy may be moneymarket securities, capital market securities, bonds, valuing commonstock, or valuing preferred stock. A benefit of money marketsecurities is quick access to the cash with low risk. Capitalmarket securities include stocks and bonds that are a term of ayear or longer. Examples are corporate bonds, or common orpreferred stock.
Corporate bond risk depends on the financial health of thecorporation. Benefits of corporate bonds also depend on thefinancial health of the corporation and can be long term for years.Common stock is higher interest rate with higher risk. Common stockdoes not appear to have term limits or limits on maturity.Preferred stock has more risk than corporate bonds. Benefits ofpreferred stock depend on the rate of return.
Investor risk to help Genesis Energy involves the ability ofGenesis to effectively manage their debt to assets and pay off theliabilities. The investors will most likely expect to get a largerate of return. Investors will want to be paid higher dividendswhich is known as the weighted average cost of capital (WACC).
According to Gurufocus.com “As of today, Apple Inc's weightedaverage cost of capital is 9.8%. Apple Inc's ROIC % is 28.53%”(Gurufocus.com, n.d.).
According to Gurofocus.com: “As of today, Genesis Energy LP'sweighted average cost of capital is 7.73%. Genesis Energy LP's ROIC% is 4.55%, and Cost of Debt = 129.809 / 3006.7115 = 4.3173%.”(Gurufocus.com, Genesis Energy LP , 2018).
The required rate of return for Genesis Energy shareholdersneeds to be larger than the weighted average cost of capital. Itneeds to be larger than 7.74%. If you compare to Apple Inc, Apple’sreturn on investment is approximately 18% higher than their averagecost of capital of 9.8%. Genesis Energy needs to raise capital tobring the return on investment higher to make it worth thesacrifice for investors.
Gurufocus.com. (2018, 02 24). Retrieved from Genesis Energy LP :https://www.gurufocus.com/term/wacc/NYSE:GEL/Weighted+Average+Cost+Of+Capital+%2528WACC%2529/Genesis+Energy+LP
Gurufocus.com. (n.d.). Apple Inc (NAS:AAPL) WACC %:9.8% Asof Today. Retrieved 02 24, 2018, fromhttps://www.gurufocus.com/term/wacc/AAPL/Weighted-Average-Cost-Of-Capital-WACC/Apple-Inc

Answer & Explanation Solved by verified expert

4.2 Ratings (592 Votes)

The first part of the discussion is correct that capital market securities are usually of a longer tenure compared to money market securities such as commercial paper or certificate of deposits It is also true that investors holding common stock have taken See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Comment this discussion :Sources of long term finances for Genesis Energy may be moneymarket securities, capital market securities, bonds, valuing commonstock, or valuing preferred stock. A benefit of money marketsecurities is quick access to the cash with low risk. Capitalmarket securities include stocks and bonds that are a term of ayear or longer. Examples are corporate bonds, or common orpreferred stock.Corporate bond risk depends on the financial health of thecorporation. Benefits of corporate bonds also depend on thefinancial health of the corporation and can be long term for years.Common stock is higher interest rate with higher risk. Common stockdoes not appear to have term limits or limits on maturity.Preferred stock has more risk than corporate bonds. Benefits ofpreferred stock depend on the rate of return.Investor risk to help Genesis Energy involves the ability ofGenesis to effectively manage their debt to assets and pay off theliabilities. The investors will most likely expect to get a largerate of return. Investors will want to be paid higher dividendswhich is known as the weighted average cost of capital (WACC).According to Gurufocus.com “As of today, Apple Inc's weightedaverage cost of capital is 9.8%. Apple Inc's ROIC % is 28.53%”(Gurufocus.com, n.d.).According to Gurofocus.com: “As of today, Genesis Energy LP'sweighted average cost of capital is 7.73%. Genesis Energy LP's ROIC% is 4.55%, and Cost of Debt = 129.809 / 3006.7115 = 4.3173%.”(Gurufocus.com, Genesis Energy LP , 2018).The required rate of return for Genesis Energy shareholdersneeds to be larger than the weighted average cost of capital. Itneeds to be larger than 7.74%. If you compare to Apple Inc, Apple’sreturn on investment is approximately 18% higher than their averagecost of capital of 9.8%. Genesis Energy needs to raise capital tobring the return on investment higher to make it worth thesacrifice for investors.Gurufocus.com. (2018, 02 24). Retrieved from Genesis Energy LP :https://www.gurufocus.com/term/wacc/NYSE:GEL/Weighted+Average+Cost+Of+Capital+%2528WACC%2529/Genesis+Energy+LPGurufocus.com. (n.d.). Apple Inc (NAS:AAPL) WACC %:9.8% Asof Today. Retrieved 02 24, 2018, fromhttps://www.gurufocus.com/term/wacc/AAPL/Weighted-Average-Cost-Of-Capital-WACC/Apple-Inc