Initial Capital Investment - Calculate Depreciation

It is estimated that the plant and machineries will cost Tesla $5 billion to build. Tesla expects to operate the plant for 40 years. The plant and machineries will be depreciated using straight line method over 40-year useful life, with a salvage value of $50 million.

The plant and machineries are expected to be sold for $100 million at the end of the project.

Revenues - Calculate expected revenue per year and total revenue

The plant is expected to produce 30,000 cars in the first year of its operation with an average sale price of $80,000 per car. Total revenues are expected to grow at 30% from year 2 to year 5 and then at 10% from year 6 to year 9. From year 10 onwards (including year 10), total annual sales are expected to remain the same with no growth expected.

Cost of Revenues Cost of revenues is expected to stay around 70% of the revenues throughout the life of

the project.

Operating Expenses

Operating expenses are expected to be 20% of the revenues from year 1 to year 5. From year 6 onwards (including year 6), operating expenses will be approximately 15% of the revenues.

Tax Corporate Tax Rate is 30%.

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Net Working Capital The project will require a net working capital balance at the end of each year equal to

20% of next years forecasted sales. At the end of the project, net working capital balance can be fully recovered.

With the above information. Calculate the Free Cash Flow generated from the project.