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Tesla is deciding whether to invest in a new automobile assembly plant designed to produce autonomous vehicles, called T-quest. It will cost $400 million to build. If T-quest is successful, the plant will result in a constant stream of revenues for the next 20 years year of $600 million per annum. If the unsuccessful, the stream of revenues will be $300 million per annum. Tesla's financial assessment predict a 40% chance of success, and 60% chance of failure. The costs of goods are 80% of revenues and will be constant through the years. Level of working capital is 5% of the next year's sales revenues. The risk-adjusted cost of capital for this project is 20%, the opportunity cost of capital for the company is only 9%. The marginal tax rate is 40% for the company. The project has a 20-year term. Tesla uses straight-line depreciation method with a zero-salvage value.
Problem 1: Determine if Tesla should undertake this investment opportunity. Take your pick of the best investment criterion to use and solve the problem using only that criterion.
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On May 1, 2014, ABC corporation purchased equipment for $60,000 by issuing a one-year, 4% note payable, with interest to be paid at maturity on May 1,2015. The company routinely depreciates its equipment over a 5 year life with salvage value using st..
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Assess the financial reporting landscape considering user needs, constraints, and business environment -Identify the issues
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