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Tesla has just issued new bonds to help finance the company's new investments. The bonds are 4 year bonds that pay no coupons and a
Tesla has just issued new bonds to help finance the company's new investments. The bonds are 4 year bonds that pay no coupons and a Face Value of $1,000. An investment bank estimates that these bonds will sell for $854.94 each. If the corporate tax rate is 20%, the after-tax cost of debt for these bonds is %. Enter your answer in percent, rounded to two decimal places, example: 4.12 Tesla will also issue common stock shares, that pay no dividend, to help finance the company's new investments. The common shares are estimated to have a beta of 1.22. The investment bank estimates that the Market Risk Premium is 8.82% and that the risk-free rate is 1.39%. Investors that buy these shares should expect to earn % for bearing the risk of Tesla. Enter your answer in percent, rounded to two decimal places, example: 20.23 Assuming the following for the securities that Tesla issues: the YTM on the bonds is 11.55%, the dollar weight of the bonds issued is 53%, the required rate of return on the common shares issued is 16.24%, the dollar weight of the common shares must be %, and the corporate tax rate (T) is 20%. Tesla does not issue any Preferred shares. The Weighted Average Cost of Capital for Tesla is %. Note that dollar weights of the bonds and stocks must add up to 1.0 (100%) AND please don't forget to use ONLY DECIMAL values in your calculations rather than percentages! Enter your answers in percent, example: 43, 8.33
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