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英语金融代写-FINE 7640

时间：2021-03-18

FREEMAN SCHOOL OF BUSINESS

FINE 7640

Valuation

Spring 2021

Page 1 of 2

FCFF Model

Using Tesla’s financial reports, we are forecasting the stock price at the beginning of year 2017.

[All the dollar values are in thousands]

Step 1. Estimate the Discount Rate.

a. Find the cost of equity using information in Excel “Stock Return”.

a.1. Fill in your answers in excel “Cost of Capital”.

[Use the 10-year treasury rate in the CAPM. Assume a market risk premium of 5.5%]

a.2. Based on the regression, do you think this is a good estimate for the firm’s cost of equity?

Explain your answer.

b. Find the cost of debt using the information in Excel “Cost of Capital”

c. Find the cost of capital (WACC) using information in Excel “Cost of Capital”.

[Note: We shall adjust the market value of debt by the operating lease. You should solve step 2,

part a, before solving this part]

Step 2. Adjustment on accounting measures.

a. Find the Operating lease using information in Tesla’s 2016 annual report, then put all

information in Excel “Operating lease Converter”.

b. Find the R&D expense using information in Tesla 2016 annual report and Tesla 2013 annual

report over last 6 years, then put all information in Excel “R&D Converter”.

c. Our base year is 2016. Using the financial information, calculate the adjusted operating

income (EBIT) and operating margin (EBIT) in the base year. You should fill in your answers

in the Excel “valuation output”. Write down the formula to calculate the adjusted operating

income.

d. Calculate the invested capital in the base year. Write the formula to calculate the invested

capital. Should we include cash and marketable securities in the invested capital? Explain your

results.

Page 2 of 2

e. At the end of 2016, Tesla has carry-forward net operating loss (NOL) of $4,340,000. How will

this NOL affect for Tesla’s future after-tax EBIT?

Step 3. Assumptions

We will use a 3-stage model with a ten-year extraordinary growth period. After year 10, assume

the remaining years with stable growth rate.

a. Which industries does Tesla belong to?

b. Since the firm has negative operating income, we need start our growth forecast from revenue.

Explain how one might estimate the revenue growth rate of Tesla in the extraordinary growth

period and in the stable growth period.

c. Assume a sales growth rate of 35% from year 1 to year 5, then from year 6, we assume the

sales growth will drop linearly to 2.23% in year 10. After year 10, the sales growth rate will

remain at 2.23%. Fill in the revenue growth rate in Excel “Valuation Output”.

d. We assume Tesla in year 10 will reach a target operating margin. Explain how to find the

target operating margin.

e. Assume the target operating margin is 12% in year 10. Assume the operating margin of Tesla

will move linearly toward the target operating margin. Fill in the operating margin from year 1 to

year 10.

f. We need to reinvest capital to sustain the sales growth rate. Explain how to find a target sales-

to-capital ratio.

g. Assume the target sales-to-capital ratio is 2.24. For Tesla, do you think this is a reasonable

target sales-to-capital ratio? Explain your answers.

Step 4. Cash flow forecast

a. Based on the above three steps, find the FCFF from year 1 to year 10.

b. The cost of capital we estimated in Step 1 should be the current cost of capital. As the firm

moves to the stable growth, the cost of capital will also change. Assume, from year 1 to year 5, a

cost of capital equal to the current cost of capital. From year 6 to year 10, assume the cost of

capital will linearly reduce to the stable cost of capital, with the stable cost of capital= Current

cost of capital -1%. Fill in the cost of capital in Excel “Valuation Output”.

c. Calculate the value of equity/share using all the information above.

学霸联盟

FINE 7640

Valuation

Spring 2021

Page 1 of 2

FCFF Model

Using Tesla’s financial reports, we are forecasting the stock price at the beginning of year 2017.

[All the dollar values are in thousands]

Step 1. Estimate the Discount Rate.

a. Find the cost of equity using information in Excel “Stock Return”.

a.1. Fill in your answers in excel “Cost of Capital”.

[Use the 10-year treasury rate in the CAPM. Assume a market risk premium of 5.5%]

a.2. Based on the regression, do you think this is a good estimate for the firm’s cost of equity?

Explain your answer.

b. Find the cost of debt using the information in Excel “Cost of Capital”

c. Find the cost of capital (WACC) using information in Excel “Cost of Capital”.

[Note: We shall adjust the market value of debt by the operating lease. You should solve step 2,

part a, before solving this part]

Step 2. Adjustment on accounting measures.

a. Find the Operating lease using information in Tesla’s 2016 annual report, then put all

information in Excel “Operating lease Converter”.

b. Find the R&D expense using information in Tesla 2016 annual report and Tesla 2013 annual

report over last 6 years, then put all information in Excel “R&D Converter”.

c. Our base year is 2016. Using the financial information, calculate the adjusted operating

income (EBIT) and operating margin (EBIT) in the base year. You should fill in your answers

in the Excel “valuation output”. Write down the formula to calculate the adjusted operating

income.

d. Calculate the invested capital in the base year. Write the formula to calculate the invested

capital. Should we include cash and marketable securities in the invested capital? Explain your

results.

Page 2 of 2

e. At the end of 2016, Tesla has carry-forward net operating loss (NOL) of $4,340,000. How will

this NOL affect for Tesla’s future after-tax EBIT?

Step 3. Assumptions

We will use a 3-stage model with a ten-year extraordinary growth period. After year 10, assume

the remaining years with stable growth rate.

a. Which industries does Tesla belong to?

b. Since the firm has negative operating income, we need start our growth forecast from revenue.

Explain how one might estimate the revenue growth rate of Tesla in the extraordinary growth

period and in the stable growth period.

c. Assume a sales growth rate of 35% from year 1 to year 5, then from year 6, we assume the

sales growth will drop linearly to 2.23% in year 10. After year 10, the sales growth rate will

remain at 2.23%. Fill in the revenue growth rate in Excel “Valuation Output”.

d. We assume Tesla in year 10 will reach a target operating margin. Explain how to find the

target operating margin.

e. Assume the target operating margin is 12% in year 10. Assume the operating margin of Tesla

will move linearly toward the target operating margin. Fill in the operating margin from year 1 to

year 10.

f. We need to reinvest capital to sustain the sales growth rate. Explain how to find a target sales-

to-capital ratio.

g. Assume the target sales-to-capital ratio is 2.24. For Tesla, do you think this is a reasonable

target sales-to-capital ratio? Explain your answers.

Step 4. Cash flow forecast

a. Based on the above three steps, find the FCFF from year 1 to year 10.

b. The cost of capital we estimated in Step 1 should be the current cost of capital. As the firm

moves to the stable growth, the cost of capital will also change. Assume, from year 1 to year 5, a

cost of capital equal to the current cost of capital. From year 6 to year 10, assume the cost of

capital will linearly reduce to the stable cost of capital, with the stable cost of capital= Current

cost of capital -1%. Fill in the cost of capital in Excel “Valuation Output”.

c. Calculate the value of equity/share using all the information above.

学霸联盟