Question

In: Finance

Calculate Tesla INC.'s WACC for fiscal years 2017, 2016, 2015.

Calculate Tesla INC.'s WACC for fiscal years 2017, 2016, 2015.

Solutions

Expert Solution

WACC=E/(E + D)*Cost of Equity+D/(E + D)*Cost of Debt*(1 - Tax Rate)

For 2017, TESLA inc data is as follows:

Weight of equity = E / (E + D) = 61502.650 / (61502.650 + 8721.6845) = 0.8758

Weight of debt = D / (E + D) = 8721.6845 / (61502.650} + 8721.6845) = 0.1242

For 2016

Weight of equity = E / (E + D) = 59533.720 / (59533.720 + 8876.3221) = 0.8702

Weight of debt = D / (E + D) = 8876.3221 / (59533.720 + 8876.3221) = 0.1298

For 2015

Weight of equity = E / (E + D) = 60222.983 / (60222.983 + 8076.761) = 0.8817

Weight of debt = D / (E + D) = 8076.761 / (60222.983 + 8076.761) = 0.1183

Cost of Equity as per CAPM = Rf + beta * Market risk premium

Cost of Equity = 2.92000000% + 0.91 * 6% = 8.38%

Cost of debt is assumed to market yield on tesla = 6%

Corporate tax rate for 2017 is 21% since it was brought down by the new Tax laws. For 2015 and 2016, we assume tax rate to be 35%

WACC for 2017 = 0.8758*8.38 + 0.1242*6*(1-0.21) = 7.93%

WACC for 2016 = 0.8702*8.38 + 0.1298*6*(1-0.35) = 7.80%

WACC for 2015 = 0.8817*8.38 + 0.1183*6*(1-0.35) = 7.85%

Note: Data obtained from Yahoo! Finance

jeff jeffy answered 2 years ago
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