Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. Go to www.sec.gov and follow the Search Edgar For Company Filings link, and search for filings made by TESLA motors (TSLA). Find the most

2. Go to www.sec.gov and follow the "Search Edgar For Company Filings" link, and search for filings made by TESLA motors (TSLA). Find the most recent 10Q or 10K and download the form. Look on the balance sheet to find the book value of debt and the book value of equity.

To estimate the cost of equity for TSLA go to finance.yahoo.com follow the "Bonds" link. 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?

You now need to calculate the cost of debt for TSLA. Go to finra-markets.morningstar.com, find bonds, and enter TSLA. Find the yield to maturity for each of TSLA's 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? Show your work in Excel with the correct formulas.

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 35 percent marginal tax rate. Which number is more relevant? Show your work in excel with relevant formulas.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

ISE Financial Institutions Management A Risk Management Approach

Authors: Anthony Saunders Professor, Marcia Millon Cornett, Otgo Erhemjamts

10th International Edition

1260571475, 9781260571479

More Books

Students also viewed these Finance questions

Question

Repeat the previous problem for the decay mode - 0 + K-?

Answered: 1 week ago

Question

What are the strengths and weaknesses of arguments by analogy?

Answered: 1 week ago

Question

What is organizational flattening? Why is it practiced?

Answered: 1 week ago