Exercise 8A: Perform an EPS/EBIT Analysis for Tesla

Instructions

Amount Tesla needs: $10,000 million to build four new manufacturing plants outside the United States

• Interest rate: 2.99%

• Tax rate: 15.27%

• Stock price: $84.90 as of January 2, 2020

• Number of shares outstanding: 1083 million

• EBIT: Pessimistic: $2,000 million, Realistic: $5,000 million, Optimistic: $10,000 million

Steps

1. Prepare an EPS/EBIT analysis for Tesla. Determine whether the company should use all debt, all stock, or a 50-50 combination of debt and stock to finance this market-development strategy.

2. Develop an EPS/EBIT chart after completing the EPS/EBIT table.

3. Next, give a three-sentence recommendation for Tesla CFO.

4. In 50-100 words, provide a summary recommendation/analysis overview for this part