Intro

It is the end of $2024.$ You're a financial analyst working for Tesla Motors. The company is considering producing

the new Model $Z$ car and is predicting the following sales $($in $ million$).$ Assume all cash flows occur at the end of

the year.

COGS and SG&A are expected to add up to $70\%$ of sales. After $2029,$ production will end and the factory will

shut down.

To start production at the beginning of $2026,$ Tesla has to invest $$200$ million now and $$100$ million in $2025$ to

bulid a new factory. After completion at the end of $2025,$ the factory can be depreciated straight to zero over $10$

years. The factory is expected to be worth $$100$ million at the end of $2029.$

Net working capital consists mainly of inventory of car components, minus some current liabilities. Net working

capital is expected to be always $15\%$ of sales, until the last year of the project when it will all be recouped.

Tesla has a weighted average cost of capital of $15\%$ and a marginal tax rate is $18\%.$

Part $1$

$1$ Attempt $\frac{1}{10}$ for $10$ pts$.$

Open a spreadsheet with a blank tab and name it $\text{'}C{F}^2\text{'},$ for cash flows. Duplicate the table above and extend it to

find the operating cash flow for each year. What is the operating cash flow for $2029($in $ million$)?$

Part $2$

Extend the spreadsheet to find net capital spending for each year. What is net capital spending for $2029($in $

million$)?$ Include the after$-$tax salvage value of the factory and enter it with the correct sign.

Part $3$

$1$ Attempt $\frac{1}{10}$ for $10$ pts$.$

Extend the spreadsheet to find the change in net working capital for each year. What is the change in net working

capital for $2029($in $ million$)?$

Part $4$

Attempt $\frac{1}{10}$ for $10$ pts$.$

Extend the spreadsheet to find the cash flow from assets for each year. What is the CFA for $2029($in $ million$)?$

Part $5$

What is the NPV of the project $($in $ million$)?$