Tesla Financial Planning

Strategic and Financial Planning Tesla Motors
Kirk Hodges
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Preface:
Strategic planning can be best defined as the process by which a business evaluates its present situation in comparison with the envisioned goals of the company. Then this is followed by estimation of cost and resources that would be required for fulfilling the goals of the company. The process of strategic planning is deeply related to financial planning in the sense that accumulation and allocation of resources is primary in attainment of the objectives. This paper is based on the analysis of the strategic initiatives by M/s. Tesla Motors, its relationship with the company’s financial planning and other

Also true to the mission statement in 2012 the autopilot mode was launched in both the variants. The company had surpassed the 100000 mark and was running in 42 countries. The percentage sale of Tesla model vehicle in US had increased by 51.01% in the year 2015 as compared to the year 2014, after introduction of more variants to the model S as stated in the strategic plan in annual report 2012.Revenue for the financial year 2015 had increased by 47% as compared to 2014.However these strategies implemented by the company were counter acted with the out of proportionate increase in the cost of production as well as cost of sales in FY 2015 as compared to FY 2014 resulting in a higher loss per

At the end of FY 2015 the debt equity ratio of the company stood at 2.45, which is higher than the prescribed 2:1. However, as far as automotive industry is concerned this prevails to be the average.
Weighted Average Cost of Capital is the return that on an average a stake holder would expect from a company. This would be the cost at which the company is borrowing to fund its activities. The Weighted Average Cost of Capital of Tesla is calculated as follows: (Data base reference, results of the company for quarter ended 31.03.2016)
In case of debt the two years average short term and long term debt is taken. Which is $ 2551.71 Mil.The market capitalisation of equity is at $29328 Mil.
The cost of equity will be 10 year constant treasury rate as risk free rate multiplied by the beta risk factor which is excess returns for the excess risk accepted by the investor. Tesla’s Beta is 0.99. Expected Market return is 7.5%. Therefor cost of capital would be: 1.84%+ 0.99x7.5% = 9.26%
Cost of debt would be the interest expense of 2015 divided by the debt outstanding at the end of the year. As of 2015 this would be 118.85 / 2551.71 ie.,