Explain how relative risk (from the investor’s perspective) impacts the cost of capital for Genesis.

Assignment 1: Discussion—Finance Organization and Long-Term Planning

Considering Genesis’s aggressive growth plan, Sensible Essentials suggested that its client should broaden the scope of financing beyond short-term loans and consider long-term financing options. These options would greatly enhance the ability of the operations management team to fund the capital investments and growth in operating expenses.

One option is selling more equity in the company. A public stock offering might be a possibility; however, a company as young and small as Genesis might be hard to value. Sensible Essentials believes that another private investor might require preferred stock dividends in order to mitigate some of the financial risk. Another option is a long-term bank loan.

Acting as the finance expert for Sensible Essentials, respond to the following:

  • Identify the sources of long-term financing for Genesis.
  • Analyze the potential costs and benefits of each option.
  • Explain how relative risk (from the investor’s perspective) impacts the cost of capital for Genesis.

Write your initial response in 3–4 paragraphs. Apply APA standards to citation of sources.

By Saturday, November 21, 2015, post your response to the appropriate Discussion Area. Through Wednesday, November 25, 2015, review and comment on at least two peers’ responses. In your response, do the following:

  • Respond with substantial comments to enrich discussion and the learning experience.
  • Contribute new, relevant information or quotes from course readings, Web sites, or other sources. Build on the remarks or questions of others, or share practical examples of key concepts from your experience, professional or personal.

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.

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