Tesla is looking to expand its production for high capacity batteries in Mexico. Elon Musk expects...
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Tesla is looking to expand its production for high capacity batteries in Mexico. Elon Musk expects that the production plant will cost 3.25B Mexican pesos to start. It will take one year to complete the factory so in the first year it will not generate any cash flows. The plant will generate 200M, 300M, 400M, 500M, 500M pesos in the subsequent five years respectively. Additionally in the 6th year, Elon expects that the factory will be worth 4B pesos. (Hint: Slides 27-29) Currently the exchange rate is $1/13 Mexican Peso. The expected annual inflation in the US is 2% and 5% in Mexico. 2) If the required rate of return is 10% in the US currency, should Elon Musk invest in the project? Tesla is looking to expand its production for high capacity batteries in Mexico. Elon Musk expects that the production plant will cost 3.25B Mexican pesos to start. It will take one year to complete the factory so in the first year it will not generate any cash flows. The plant will generate 200M, 300M, 400M, 500M, 500M pesos in the subsequent five years respectively. Additionally in the 6th year, Elon expects that the factory will be worth 4B pesos. (Hint: Slides 27-29) Currently the exchange rate is $1/13 Mexican Peso. The expected annual inflation in the US is 2% and 5% in Mexico. 2) If the required rate of return is 10% in the US currency, should Elon Musk invest in the project?
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Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
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