1. Most publicly traded corporations are required to submit quarterly (10-Q) and annual (10-K) reports to the SEC detailing the financial operations of the company over the past quarter or year, respectively. These corporate filings are available on the SEC website at www.sec.gov. Go to the SEC website and search for SEC filings made by Tesla Motors (TSLA). Find the most recent 10-Q or 10-K, and download the form. Look on the balance sheet to find the book value of debt and the book value of equity.

2. To estimate the cost of equity for TSLA, go to finance.yahoo.com and enter the ticker symbol TSLA. Follow the links to answer the following questions: What is the most recent stock price listed for TSLA? What is the market value of equity, or market capitalization? How many shares of stock does TSLA have outstanding? What is the most recent annual dividend? Can you use the dividend discount model in this case? What is the beta for TSLA? Now go back to finance.yahoo.com and find the current U.S. Treasury bond rates. What is the yield on three-month Treasury bills? Using the historical market risk premium, what is the cost of equity for TSLA using CAPM?

3. You now need to calculate the cost of debt for TSLA. Go to finra-markets.morningstar.com/BondCenter/, enter TSLA as the company, and find the yield to maturity for each of TSLAs bonds. What is the weighted average cost of debt for TSLA using the book value weights and using the market value weights? Does it make a difference in this case if you use book value weights or market value weights?

4. You now have all the necessary information to calculate the weighted average cost of capital for TSLA. Calculate this using book value weights and market value weights, assuming TSLA has a 21 percent marginal tax rate. Which number is more relevant?

5. You used TSLA as a pure play company to estimate the cost of capital for LMI. Are there any potential problems with this approach in this situation?