Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer # 3 in its entirety. QUESTIONS 1. Most publicly traded corporations are required to submit quarterly (10-Q) and annual (10-K) reports to the

image text in transcribed

Please answer # 3 in its entirety.

QUESTIONS 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, respec- tively. These corporate filings are available on the SEC website at www.sec.gov. Go to the SEC web- site and search for SEC filings made by Tesla Mo- tors (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 fi- nance.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 eq- uity, 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/Bond- Center, enter TSLA as the company, and 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? 4. You now have all the necessary information to cal- culate 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 esti- mate the cost of capital for LMI. Are there any po- tential problems with this approach in this situation? QUESTIONS 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, respec- tively. These corporate filings are available on the SEC website at www.sec.gov. Go to the SEC web- site and search for SEC filings made by Tesla Mo- tors (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 fi- nance.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 eq- uity, 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/Bond- Center, enter TSLA as the company, and 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? 4. You now have all the necessary information to cal- culate 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 esti- mate the cost of capital for LMI. Are there any po- tential problems with this approach in this situation

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

Advanced Finance

Authors: Michael Fardon

1st Edition

1872962319, 1872962173, 978-1872962313, 978-1872962177

More Books

Students also viewed these Finance questions

Question

2. What role should job descriptions play in training at Apex?

Answered: 1 week ago