The Cost of Equity of TSLA using CAPM. Introduction: CAPM is abbreviated as Capital Asset Pricing Model . Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments which also includes the beta of an asset. Beta is a numerical assessment that evaluates the variations of a stock to fluctuations in the total stock market. Risk-free Rate is the he optimal rate on an investment that can be attained deprived of acquiring any risk whereby the stockholder is guaranteed of getting both original principal and a marginal profit during the specified time period. Market Risk Premium is the estimated by initially discovering the expected return of an asset or portfolio.

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Chapter 13, Problem 2MC

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To determine: The Cost of Equity of TSLA using CAPM.

Introduction:

CAPM is abbreviated as Capital Asset Pricing Model. Expected Return is the method of finding the average anticipated probability of several diverse interest rates that are probable on a particular asset. The issues in such persistence comprise of dissimilar market environments which also includes the beta of an asset. Beta is a numerical assessment that evaluates the variations of a stock to fluctuations in the total stock market.

Risk-free Rate is the he optimal rate on an investment that can be attained deprived of acquiring any risk whereby the stockholder is guaranteed of getting both original principal and a marginal profit during the specified time period. Market Risk Premium is the estimated by initially discovering the expected return of an asset or portfolio.

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How do you determine the Cost of Equity? Ask your stockholders, or their representatives on the Board of Directors Take the risk-free rate and add the product of your equity beta and the market risk premium Multiply your cost of debt by 1 minus the tax rate Subtract your cost of debt from your WACC