Question
The question is asking the information be pulled from current bonds for TSLA on finra-markets.morningstar.com. You now need to calculate the cost of debt for
The question is asking the information be pulled from current bonds for TSLA on finra-markets.morningstar.com.
You now need to calculate the cost of debt for TSLA. Go to finra-markets.morningstar.com, enter TSLA as the company, and find the yield to maturity for each of TSLAs 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? 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 21 percent marginal tax rate. Which number is more relevant?
You used Tesla as a representative company to estimate the cost of capital for SMI. What are some of the potential problems with this approach in this situation? What improvements might you suggest?
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