You're an experienced investment manager at Holon and you've asked your summer intern (junior worker) to...

       

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You're an experienced investment manager at Holon and you've asked your summer intern (junior worker) to update the firm's October 2021 DCF valuation model of Tesla. The intern is trying to guess how the following updates will affect the Tesla share price that's output by the spreadsheet model. In the first sentence they've given the factually correct new data. But they have asked you to check their conclusions in the second sentence. Which of the below statements contain a second sentence that is NOT correct? a. The risk free rate (cell D496) has increased from 1% pa to 3.8% pa as at 30 Sept 2022. Increasing the risk free rate will reduce the Tesla share price, all other things remaining equal. O b. The market risk premium (MRP, cell D495) has risen from 6% pa to 6.1% pa. Increasing the MRP will reduce the Tesla share price, all other things remaining equal. O c. Increased competition and higher raw material (lithium) and worker costs have decreased profit margins. Decreasing the profit margin will reduce the share price, all other things remaining equal. O d. Tesla's number of shares was 1 billion (cell Z543) on 13 October 2021, and it completed a 3-for-1 stock split on 25 August 2022. This will increase the number of shares to around 4 billion, reducing the model-estimated share price (cell D530) to be $923.60, one quarter of its old value ($3694.40). O e. Tesla's market share price was $268.21 on 29 September 2022. After adjusting for the stock split above, the Holon model suggests that Tesla is under-valued, all other things remaining equal. You're an experienced investment manager at Holon and you've asked your summer intern (junior worker) to update the firm's October 2021 DCF valuation model of Tesla. The intern is trying to guess how the following updates will affect the Tesla share price that's output by the spreadsheet model. In the first sentence they've given the factually correct new data. But they have asked you to check their conclusions in the second sentence. Which of the below statements contain a second sentence that is NOT correct? a. The risk free rate (cell D496) has increased from 1% pa to 3.8% pa as at 30 Sept 2022. Increasing the risk free rate will reduce the Tesla share price, all other things remaining equal. O b. The market risk premium (MRP, cell D495) has risen from 6% pa to 6.1% pa. Increasing the MRP will reduce the Tesla share price, all other things remaining equal. O c. Increased competition and higher raw material (lithium) and worker costs have decreased profit margins. Decreasing the profit margin will reduce the share price, all other things remaining equal. O d. Tesla's number of shares was 1 billion (cell Z543) on 13 October 2021, and it completed a 3-for-1 stock split on 25 August 2022. This will increase the number of shares to around 4 billion, reducing the model-estimated share price (cell D530) to be $923.60, one quarter of its old value ($3694.40). O e. Tesla's market share price was $268.21 on 29 September 2022. After adjusting for the stock split above, the Holon model suggests that Tesla is under-valued, all other things remaining equal.

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