Equity at 10.30 percent and three debt issues at market value, weighted 61.5 to 38.5, bring the river carrier's GB550 Unit 6 cost of capital estimate to 8.27 percent. Searches like "gb 550 unit 6 assignment example", "gb550 unit 6 sample" and "gb550 unit 6 example" land here.
What a finished GB550 Unit 6 cost of capital estimate looks like
Five blocks and a summary table on about five pages. Debt is valued instrument by instrument: unsecured notes at 236.0 million from the Unit 3 price, secured notes at 109.0 million and a 60 million bank loan at par, for 405.1 million. Their yields of 7.05, 5.61 and 6.60 percent blend to a pre-tax cost of 6.60 percent, 5.01 after the 24 percent tax rate. Equity comes from the capital asset pricing model: 4.4 percent plus 1.18 times a 5.0 percent premium gives 10.30. At 22.80 a share, 28.4 million shares are worth 647.5 million, so equity carries 61.5 percent of a 1,052.6 million total. The weighted cost is 8.27 percent. Book weights would give 7.99, and counting 46 million of chartered-towboat leases as debt, 8.14.
How a GB550 Unit 6 example is structured
Each component is built where a reader can audit it, and each carries a pointer to the unit that produced its input. A purpose paragraph states that the rate is for projects of average risk in the existing fleet business. The debt block values every instrument separately, since averaging coupons would ignore that the unsecured notes trade below par. A short tax paragraph applies the deduction to debt only. The equity block uses the pricing model and reports the dividend model's implied 7.86 percent as a cross-check, explaining why the gap is too wide to average away. Weights use market values on one date. Two sensitivity lines follow, book weights and lease-adjusted debt, each with its rate. The summary table multiplies cost by weight for every component, and a closing sentence names the kinds of project the 8.27 percent should not be used for.
Debt priced one issue at a time
Unsecured notes, secured notes and the bank loan are each carried at market value with their own yield, rather than folded into a single coupon average.
Tax on the debt line only
The 24 percent rate turns a 6.60 percent pre-tax cost into 5.01, while equity is carried at its full 10.30 percent.
A cross-check that disagrees
The dividend model's implied 7.86 percent is reported, and the paper keeps the pricing-model figure, explaining that averaging two estimates this far apart would hide the problem.
Market weights, one date
Equity at 647.5 million and debt at 405.1 million give weights of 61.5 and 38.5 percent, with book-value weights shown in a note.
Leases as a sensitivity
Counting 46 million of chartered-towboat lease liabilities as debt moves the rate to 8.14 percent, and the paper reports both figures rather than choosing silently.
Where marks go in GB550 Unit 6
Market yields belong on the debt line, not coupon rates, and GB550 has just spent a unit showing why the two differ; swapping in coupons here would give 8.09 percent and an easy deduction. Tax applied to the equity cost, or to the whole weighted figure, is a mechanical error graders spot immediately. Weights taken from the balance sheet without comment draw a deduction in a good share of sections. An equity cost given without its risk-free rate, beta and premium sourced cannot be defended. Estimates that ignore a cross-check, or average two widely different equity figures to split the difference, suggest the estimate was never examined. A rate presented as correct for every project, including ventures well outside the core business, overstates what the number can do.
Get a GB550 Unit 6 example written to your instructions
Send what your Unit 6 case supplies, whether bond prices, beta, share count or dividend history, with the prompt and rubric. Each component of the estimate is built separately, each input traced to its source and each weight taken at market value, with a cross-check on equity. The first custom sample carries no charge and generally arrives within 24-48h.
GB550 Unit 6 questions, answered
Should chartered or leased assets count as debt?
Analysts increasingly treat long leases as debt because they commit the firm to fixed payments much like a loan, and current accounting puts most of them on the balance sheet. Sections differ on whether the cost of capital estimate should include them. The sample shows the rate both ways, 8.27 and 8.14 percent, so a grader can see the effect whichever convention applies.
Why not average the two equity estimates?
Because a 2.4-point gap between 10.30 and 7.86 percent usually signals that one model's inputs are wrong, not that the truth lies halfway. The sample explains why it trusts the pricing model more for this firm: the dividend model's result depends heavily on a growth assumption that the market price may be contradicting. Some instructors accept averaging when the estimates are close.
Which risk-free rate should be used?
Most sections expect a long-term Treasury yield, often the ten-year, for a rate applied to long-lived projects. A short-term bill rate understates the cost of capital when the projects last decades, as barges do. The sample states the maturity, the date and the source for its 4.4 percent, and the custom version does the same with current figures.