Access the General Motors annual reports for the previous three years to calculate the corporation$$s cost of capital. Then complete this worksheet using the directions within to guide you. Submit your completed worksheet in the $$Assignment and Grades$$ tab in your course menu. When you have submitted this assignment for grading, please return to Module $3$ for a module wrap$-$up$.$

Calculating the Cost of Financing

Step $1.$ Calculate the weighted average cost of capital using the after$-$tax cost of debt and a required rate of return for stock of $5\%$ for each of the three years.

Note: The tax rate can be found by dividing taxes paid by the taxable income. The pre$-$tax cost of debt can be found by dividing the interest paid by the amount of debt outstanding Weighted Average Cost of Capital $($WACC$)$

Show your calculations.

Calculated Answer:

Step $2.$ Calculate the expected return of GM$$s stock the using the Capital Asset Pricing Model. Use $1\%$ as the risk$-$free rate, $1\mathrm{.}3$ as $\backslash$beta $,$ and $5\%$ as the expected market rate. GM$$s Expected Return using the Capital Asset Pricing Model $($CAPM$)$

Show your calculations.

Calculated Answer:

Step $3.$ Compare the weighted average cost of capital $($WACC$)$ with the return using the Capital Asset Pricing Model $($CAPM$).$ What does your comparison indicate?

Written Response:

Step $4.$ What does a $\backslash$beta of $1\mathrm{.}3$ mean? Written Response:

Step $5.$ Assess the risk of investing in GM stock compared to the market. Would you recommend investors to purchase the company$$s stock? Why or why not? Written Response: