Essay: Cost of capital for Tesla Motors

Sample Essay

CAPM Model

Required rate of return = risk free rate + beta (market return – risk free return)

Risk free rate of return = YTM on one year US Government Treasury Bonds = 3%

Market Return – Risk Free Return = 7%

Beta = 1.2

Therefore, the required rate of return = 3 + 1.2 x 7

= 11.4%

This cost of capital for Tesla Motors is lower than the expectation, considering the company. Its required rate of return should be higher than the average for S&P 500 companies due to a variety of reasons. It operates in the market for electric cars which is not a highly developed commodity yet and is still undergoing massive research. Therefore, investing in the company is still a potentially risky proposition, although potential returns can also be high. Furthermore, the company has rarely turned a profit since its existence and has heavily invested in research and development which increases the time required for investors to bear fruits of their investments and may also increase uncertainty linked to the company.

Thank you for visiting Essaydemon.com and viewing our articles and sample papers. Kindly be informed that all these articles and sample papers are for marketing purposes only. The sole purpose of these articles and sample papers is just to provide our customers with an idea about our services before they place an order.

Kindly visit our order/inquiry page for further assistance.

Kindly order custom made Essays, Term Papers, Research Papers, Thesis, Dissertation, Assignment, Book Reports, Reviews, Presentations, Projects, Case Studies, Coursework, Homework, Creative Writing, Critical Thinking, on the topic by clicking on the order page.

bernard

Recent Posts

Maintaining Medical Records

Maintaining Medical Records requires the appropriate software and is essential both for the patients and…

4 weeks ago

Is Scientology a Religion?

Scientology is regarded the most notorious religious movement of the 20th century. The Church of…

1 month ago

Issues of Capital Punishment

Capital punishment is a contentious and controversial issue in today’s world. The main objective of…

1 month ago

Journalism Ethics and Standards

Journalism ethics and standards comprise are adhered to by journalists. This division of media ethics is commonly called by…

2 months ago

Essay: Shakespeare’s Side of the Story

Sample Essay For Shakespeare’s side of the story, facts were derived from the chronicle by…

2 months ago

Essay: Frankenstein’s Representations

Sample Essay Frankenstein’s representations in movies are however more distorted than the original owner’s intention.…

2 months ago