Develop a forecast of Tesla's sales revenue for the period 2023 - 2032.

Be prepared to justify your forecast. Note that you are not required to

forecast other variables at this stage.

Assume that in a given year Tesla's sales increase from $200 billion to

$250 billion. Calculate the net capital expenditure and working capital

requirements this would generate if the company's Sales/Net PPE and

Working Capital/Sales ratios were 3.50 and 15.0% respectively?

Use the data in Exhibit 13 and the Hamada equation to estimate the asset

betas of the 'big ten' auto companies. Then use the median asset beta

and data on Tesla to calculate Tesla's equity beta.2

Use your estimate of Tesla's equity beta and the other data in the case to

estimate the WACC of Tesla. Use market value weights where possible.

How does this estimate of Tesla's WACC compare to the WACC

estimates of the other auto companies?

Transcribed Image Text:

63.16% Q 11 000 + 23 Rotate 1 10/15 BB- Revenue less Cost of Revenue Gross Profit less Selling, General & Admin Research & Development Other Operating Expense Operating Income (Loss) less Non-Operating (Income) Loss Interest Expense, Net EXHIBIT 7 Tesla Inc. Income Statement Year ended 31 December ][ Foreign Exchange (Gain) Loss Other Non-Operating (Income) Loss Pretax Income (Loss), Adjusted less Abnormal Losses (Gains) Pretax Income (Loss), GAAP less Income Tax Expense (Benefit) Income (Loss) from Cont Ops less Minority Interest Net Income, GAAP Basic weighted average shares (m) Diluted weighted average shares (m) Basic EPS Diluted EPS Source: Bloomberg Background 2019 $m 24,578 20,509 4,069 2,646 1,343 -146 226 596 641 -48 3 -370 295 -665 110 -775 87 -862 885 885 -$0.97 -$0.97 57 KJ Full Screen 2020 $m 31,536 24,906 6,630 3,145 1,491 -117 2,111 840 718 114 8 1,271 117 1,154 292 862 141 721 933 1,083 $0.74 $0.64 D Play Slide 2021 $m 53,823 40,217 13,606 4,517 2,593 27 6,469 180 315 0 -135 6,289 -54 6,343 699 5,644 125 5,519 986 1,129 $5.60 $4.90 Highlight 63.16% Q 11 000 + 23 Rotate 1 10/15 BB- Revenue less Cost of Revenue Gross Profit less Selling, General & Admin Research & Development Other Operating Expense Operating Income (Loss) less Non-Operating (Income) Loss Interest Expense, Net EXHIBIT 7 Tesla Inc. Income Statement Year ended 31 December ][ Foreign Exchange (Gain) Loss Other Non-Operating (Income) Loss Pretax Income (Loss), Adjusted less Abnormal Losses (Gains) Pretax Income (Loss), GAAP less Income Tax Expense (Benefit) Income (Loss) from Cont Ops less Minority Interest Net Income, GAAP Basic weighted average shares (m) Diluted weighted average shares (m) Basic EPS Diluted EPS Source: Bloomberg Background 2019 $m 24,578 20,509 4,069 2,646 1,343 -146 226 596 641 -48 3 -370 295 -665 110 -775 87 -862 885 885 -$0.97 -$0.97 57 KJ Full Screen 2020 $m 31,536 24,906 6,630 3,145 1,491 -117 2,111 840 718 114 8 1,271 117 1,154 292 862 141 721 933 1,083 $0.74 $0.64 D Play Slide 2021 $m 53,823 40,217 13,606 4,517 2,593 27 6,469 180 315 0 -135 6,289 -54 6,343 699 5,644 125 5,519 986 1,129 $5.60 $4.90 Highlight