Question $15$

You are Apple's CEO Tim Cook evaluating whether to continue Project Titan $($Apple$\text{'}$s electric

car project$)$ or kill it$.$

AAPL has $$140$ B in debt and a market cap of $$2\mathrm{.}7$ T$.$ AAPL's debt trades with a yield of $3\mathrm{.}3\%$

and their tax rate is $20\%.$

You search Yahoo Finance and find Tesla $($TSLA$)$ which has a beta of $2\mathrm{.}44.$ Tesla has a market

cap of $$535$ B and $$40$ B in debt.

With a T$-$bill rate of $4\mathrm{.}5\%,$ and market risk premium of $5\%,$ what is the appropriate cost of

capital for Project Titan?

$12\mathrm{.}8\%$

$33\mathrm{.}6\%$

$15\mathrm{.}8\%$

$11\mathrm{.}3\%$

$9\mathrm{.}1\%$You are Apple's CEO Tim Cook evaluating whether to continue Project Titan $($Apple$\text{'}$s electric car project$)$ or kill it$.$

AAPL has $$140$B in debt and a market cap of $$2\mathrm{.}7$T$.$ AAPL's debt trades with a yield of $3\mathrm{.}3\%$ and their tax rate is $20\%.$

You search Yahoo Finance and find Tesla $($TSLA$)$ which has a beta of $2\mathrm{.}44.$ Tesla has a market cap of $$535$B and $$40$B in debt.

With a T$-$bill rate of $4\mathrm{.}5\%,$ and market risk premium of $5\%,$ what is the appropriate cost of capital for Project Titan?