Question

1 Approved Answer

Posted on Jul 18, 2024

Capital Budgeting Course Project COMPANY PICKED FOR THIS PROJECT: TESLA The parameters for the week 7 project deliverable are as follows. The firm is looking

Capital Budgeting Course Project

COMPANY PICKED FOR THIS PROJECT: TESLA

The parameters for the week 7 project deliverable are as follows.

The firm is looking to expand its operations by 10% of the firm's net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm's balance sheet.)
The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and equipment's cost.
The annual EBIT for this new project will be 18% of the project's cost.
The company will use the straight-line method to depreciate this equipment. Also assume that there will be no increases in net working capital each year. Use 35% as the tax rate in this project.
The hurdle rate for this project will be the WACC that you are able to find on a financial website, such as Gurufocus.com. If you are unable to find the WACC for a company, contact your instructor. He or she will assign you a WACC rate.

Signature Assignment Deliverables

Prepare a narrated PowerPoint presentation that will highlight the following items.

Your calculations for the amount of property, plant, and equipment and the annual depreciation for the project
Your calculations that convert the project's EBIT to free cash flow for the 12 years of the project.
The following capital budgeting results for the project
- Net present value
- Internal rate of return
- Discounted payback period
- Tesla WACC rate is 8%
- BALANCE SHEET
- INCOME STATEMENT
- CASHFLOW

Balance Sheet All numbers in thousands & Get access to 15+ years of historical data with Yahoo Final Breakdown 12/31/2019 Assets Current Assets Cash Cash And Cash Equivalents 6,268,000 Short Term Investments Total Cash 6,268,000 Net Receivables 1,324,000 Inventory 3,552,000 Other Current Assets Total Current Assets 12,103,000 Non-current assets Property, plant and equip.... Gross property, plant and e... 20.199,000 Accumulated Depreciation Net property, plant and e... 20,199,000 Equity and other investments Goodwill Intangible Assets Other long-term assets 1,077,000 Total non-current assets 22.206,000 Total Assets 34.309,000 Liabilities and stockholders' eq.. Liabilities Current Liabilities Total Revenue 1,785,000 Accounts Payable 3,771,000 Taxes payable Accrued liabilities 2.905,000 Deferred revenues 1,899,000 Other Current Liabilities 317,000 Total Current Liabilities 10.667.000 Non-current liabilities Long Term Debt 11,634,000 Deferred taxes liabilities Deferred revenues 1,207.000 Other long-term liabilities 2,591,000 Total non-current liabilities 16.175,000 Total Liabilities 26,842,000 Stockholders' Equity Common Stock Retained Earnings Accumulated other comprehe... Total stockholders' equity 6,618,000 Total liabilities and stockholde... 34.309,000 Breakdown TTM 12/31/2019 Total Revenue 24,420,268 24,578,000 Cost of Revenue 20,299,247 20,509,000 4,069,000 Gross Profit 4,121,021 Operating Expenses Research Development 1,354,370 1,343,000 Selling General and Administrati... 2,614,491 2,646,000 Total Operating Expenses 3,968,861 3,989,000 Operating Income or Loss 152,160 80,000 Interest Expense 690,071 685,000 Total Other Income/Expenses Net -110,367 -104,000 Income Before Tax -606,745 -665,000 Income Tax Expense 89,837 110,000 Income from Continuing Operations -696,582 -775,000 Net Income -827,091 -862,000 Net Income available to common s... -827,091 -862,000 Reported EPS Basic -4.92 Diluted -4.92 Weighted average shares outst... Basic 177,000 Diluted 177,000 EBITDA 2,174,000 TTM 12/31/2019 Breakdown Cash flows from operating activ... Net Income -827,091 -862,000 Depreciation & amortization 2,074,050 2,154,000 Deferred income taxes Stock based compensation 822,024 898,000 Change in working capital -381,049 -349,000 Accounts receivable 39,268 Inventory -397,264 Accounts Payable Other working capital 872,286 968,000 Other non-cash items 203,237 477,000 2,405,000 Net cash provided by operatin... 2,214,802 Cash flows from investing activi... Investments in property, plant a... -1,342,516 -1,437,000 Acquisitions, net -45,000 Purchases of investments Sales/Maturities of investments Other investing activites 46,000 Net cash used for investing act... -1,398,428 1,436,000 Cash flows from financing activi... Debt repayment -8,553,029 -389,000 Common stock issued 848,000 848,000 Common stock repurchased Dividends Paid Other financing activites -564,100 222,000 Net cash used for investing act... -1,398,428 -1,436,000 Cash flows from financing activi... Debt repayment -8,553,029 389,000 Common stock issued 848,000 848,000 Common stock repurchased Dividends Paid Other financing activites -564,100 222,000 Net cash used privided by (use... 1,495,755 1,529,000 Net change in cash 2,302,429 2,506,000 3,523,000 4,277,000 Cash at beginning of period Cash at end of period Free Cash Flow 5,835,129 6,783,000 Operating Cash Flow 2,214,802 2,405,000 Capital Expenditure -1,342,516 -1,437,000 Free Cash Flow 872,286 968,000 Balance Sheet All numbers in thousands & Get access to 15+ years of historical data with Yahoo Final Breakdown 12/31/2019 Assets Current Assets Cash Cash And Cash Equivalents 6,268,000 Short Term Investments Total Cash 6,268,000 Net Receivables 1,324,000 Inventory 3,552,000 Other Current Assets Total Current Assets 12,103,000 Non-current assets Property, plant and equip.... Gross property, plant and e... 20.199,000 Accumulated Depreciation Net property, plant and e... 20,199,000 Equity and other investments Goodwill Intangible Assets Other long-term assets 1,077,000 Total non-current assets 22.206,000 Total Assets 34.309,000 Liabilities and stockholders' eq.. Liabilities Current Liabilities Total Revenue 1,785,000 Accounts Payable 3,771,000 Taxes payable Accrued liabilities 2.905,000 Deferred revenues 1,899,000 Other Current Liabilities 317,000 Total Current Liabilities 10.667.000 Non-current liabilities Long Term Debt 11,634,000 Deferred taxes liabilities Deferred revenues 1,207.000 Other long-term liabilities 2,591,000 Total non-current liabilities 16.175,000 Total Liabilities 26,842,000 Stockholders' Equity Common Stock Retained Earnings Accumulated other comprehe... Total stockholders' equity 6,618,000 Total liabilities and stockholde... 34.309,000 Breakdown TTM 12/31/2019 Total Revenue 24,420,268 24,578,000 Cost of Revenue 20,299,247 20,509,000 4,069,000 Gross Profit 4,121,021 Operating Expenses Research Development 1,354,370 1,343,000 Selling General and Administrati... 2,614,491 2,646,000 Total Operating Expenses 3,968,861 3,989,000 Operating Income or Loss 152,160 80,000 Interest Expense 690,071 685,000 Total Other Income/Expenses Net -110,367 -104,000 Income Before Tax -606,745 -665,000 Income Tax Expense 89,837 110,000 Income from Continuing Operations -696,582 -775,000 Net Income -827,091 -862,000 Net Income available to common s... -827,091 -862,000 Reported EPS Basic -4.92 Diluted -4.92 Weighted average shares outst... Basic 177,000 Diluted 177,000 EBITDA 2,174,000 TTM 12/31/2019 Breakdown Cash flows from operating activ... Net Income -827,091 -862,000 Depreciation & amortization 2,074,050 2,154,000 Deferred income taxes Stock based compensation 822,024 898,000 Change in working capital -381,049 -349,000 Accounts receivable 39,268 Inventory -397,264 Accounts Payable Other working capital 872,286 968,000 Other non-cash items 203,237 477,000 2,405,000 Net cash provided by operatin... 2,214,802 Cash flows from investing activi... Investments in property, plant a... -1,342,516 -1,437,000 Acquisitions, net -45,000 Purchases of investments Sales/Maturities of investments Other investing activites 46,000 Net cash used for investing act... -1,398,428 1,436,000 Cash flows from financing activi... Debt repayment -8,553,029 -389,000 Common stock issued 848,000 848,000 Common stock repurchased Dividends Paid Other financing activites -564,100 222,000 Net cash used for investing act... -1,398,428 -1,436,000 Cash flows from financing activi... Debt repayment -8,553,029 389,000 Common stock issued 848,000 848,000 Common stock repurchased Dividends Paid Other financing activites -564,100 222,000 Net cash used privided by (use... 1,495,755 1,529,000 Net change in cash 2,302,429 2,506,000 3,523,000 4,277,000 Cash at beginning of period Cash at end of period Free Cash Flow 5,835,129 6,783,000 Operating Cash Flow 2,214,802 2,405,000 Capital Expenditure -1,342,516 -1,437,000 Free Cash Flow 872,286 968,000