Present Value and the Risk/ Return Trade-Off of Tesla
PRESENT VALUE AND THE RISK/RETURN TRADE-OFF
For the SLP this session, you will be taking a close look at a company of your choice. You are free to choose any company you want as long as it is publicly traded on one of the major stock market exchanges such as NYSE or NASDAQ. This could be a company that you personally are interested in investing in, or a company whose product you buy, or one that you’ve read about in the news recently and would like to know more about. Do some research on this company, including recent articles. Also, look up the company on Google Finance. This will give you a wealth of information including stock prices over the last month, year, five years, etc., along with other information such as the beta or whether or not the company is profitable.
Once you have chosen a company and have done some initial research on it, write a 2- to 3-page paper discussing the following items:
Give a brief description of the company and why you find it interesting.
What is the beta of this company’s stock? Based on the magnitude of the beta, do you think it is low risk, high risk, or somewhere in between?
Now look at recent stock price movements. What is the highest price the stock has been over the last year? The lowest price over the last year? Look at the five-year pattern as well. Based on what you see, what does this tell you about the riskiness of the stock?
Look at some other companies in the same industry as your chosen company. How do they compare in terms of beta and other measures of riskiness? Would you prefer to invest in your chosen company, or do some of its competitors seem like a better bet?
SLP Assignment Expectations
Answer the assignment questions directly.
Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.
For computational problems, make sure to show your work and explain your steps.
For short answer/short essay questions, make sure to reference your sources of information with both a bibliography and in-text citations. Citation and reference style instructions are available at Trident University's Introduction to APA Style, 7th edition . Another resource is the “Writing Style Guide,” which is found under “My Resources.”
Present Value and the Risk/ Return Trade-Off
Student's Name
University Affiliation
Professor's Name
Course Title
Due Date
Present Value and the Risk/ Return Trade-Off
The chosen company is Tesla, Inc. The company primarily deals with the production of electric cars (Tesla, 2023). It is committed to reducing harmful emissions to the environment. Electric cars run on rechargeable batteries and lead to the promotion of clean energy (Kapustin & Grushevenko, 2020). The company also manufactures and sells solar energy products. It is based in California. There are several things that I find interesting about Tesla. First, it is a pioneer in the production of electric cars. The company uses edge cutting technology to manufacture super modern electric cars. Secondly, I am attracted to the charismatic leadership of the company's leader and CEO, Elon Musk. The leader is ambitious and has overcome great hurdles in leading the company towards achieving its high status today.
Tesla's current beta stands at 1.25 (Google Finance, 2023). It follows that the beta of the company is slightly more than the market average. This value also signifies that the company's stock has a volatility of about 25% more compared to the overall market. The value indicates that the stock has had significantly large price movements in recent history. Based on the beta value and these observations, labelling it as moderately risky would be proper. A beta value of 1 signified a stock that moves in tandem with the market. A value of more than one indicates that movements are more than those of the market. Since 1.25 indicates a difference of about 25%, it is best to label the beta value as moderately high risk.
Data reveals that Tesla's stock has been relatively highly volatile in the last year. The highest price point during this period was $1243.49 (Google Finance, 2023). The lowest price point for the stock during the same period was $620.57 (Google Finance, 2023). Considering that this data covers a period of one year, it is proper to conclude that the stock price for the company is quite volatile in the short term. Scrutiny of the stock data over the last five years shows that it has steadily risen. Despite this rise, the stock has been quite volatile at times. Based on scrutiny of the above-provided information, I make two main observations concerning the riskiness of the stock. First, the stock is a good investment option for the long-term investor. Considering the stock has been steadily rising, the long-term investor would greatly benefit from the stock. In addition, it is speculated that the company's stock wil...