Explain with examples how the cost of capital is determined.

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 Essential Consulting explained how the cost of external financing can be calculated.

Using the readings for the module, Argosy 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 the due date assigned, post your response to the Discussion Area. Through the end of the module, 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 CriteriaMaximum PointsQuality of initial posting, including fulfillment of assignment instructions16Quality of responses to classmates12Frequency of responses to classmates4Reference to supporting readings and other materials4Language and grammar4Total:40