Homework Help is Here – Start Your Trial Now!
Business
Finance
The intern is trying to guess how the following updates will affect the Tesla share price output by the spreadsheet model. In the first sentence, they've given the factually correct new data. But they have asked you to check their conclusions in the second sentence. Which of the below statements contains a second sentence that is NOT correct? Note: You can refer to Holon's valuation spreadsheet.

The intern is trying to guess how the following updates will affect the Tesla share price output by the spreadsheet model. In the first sentence, they've given the factually correct new data. But they have asked you to check their conclusions in the second sentence. Which of the below statements contains a second sentence that is NOT correct? Note: You can refer to Holon's valuation spreadsheet.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question

Please answer fast i give you upvote.

You're an experienced investment manager at Holon, and you've asked your summer intern (junior worker) to update the firm's October 2021 DCF valuation model of Tesla. The intern is trying to guess how the following updates will affect the Tesla share price output by the spreadsheet model. In the first sentence, they've given the factually correct new data. But they have asked you to check their conclusions in the second sentence. Which of the below statements contains a second sentence that is NOT correct? Note: You can refer to Holon's valuation spreadsheet. Select one: O a. The risk free rate (cell D496) has increased from 1% pa to 3.8% pa as at 30 Sept 2022. Increasing the risk free rate will reduce the Tesla share price, all other things remaining equal. O b. The market risk premium (MRP, cell D495) has risen from 6% pa to 6.1% pa. Increasing the MRP will reduce the Tesla share price, all other things remaining equal. O c. Increased competition and higher raw material (lithium) and worker costs have decreased profit margins. Decreasing the profit margin will reduce the share price, all other things remaining equal. O d. Tesla's number of shares was 1 billion (cell Z543) on 13 October 2021, and it completed a 3-for-1 stock split on 25 August 2022. This will increase the number of shares to around 4 billion, increasing the model-estimated share price. O e. Tesla's market share price was $268.21 on 29 September 2022. After adjusting for the stock split above, the Holon model suggests that Tesla is under- valued, all other things remaining equal.
Transcribed Image Text:You're an experienced investment manager at Holon, and you've asked your summer intern (junior worker) to update the firm's October 2021 DCF valuation model of Tesla. The intern is trying to guess how the following updates will affect the Tesla share price output by the spreadsheet model. In the first sentence, they've given the factually correct new data. But they have asked you to check their conclusions in the second sentence. Which of the below statements contains a second sentence that is NOT correct? Note: You can refer to Holon's valuation spreadsheet. Select one: O a. The risk free rate (cell D496) has increased from 1% pa to 3.8% pa as at 30 Sept 2022. Increasing the risk free rate will reduce the Tesla share price, all other things remaining equal. O b. The market risk premium (MRP, cell D495) has risen from 6% pa to 6.1% pa. Increasing the MRP will reduce the Tesla share price, all other things remaining equal. O c. Increased competition and higher raw material (lithium) and worker costs have decreased profit margins. Decreasing the profit margin will reduce the share price, all other things remaining equal. O d. Tesla's number of shares was 1 billion (cell Z543) on 13 October 2021, and it completed a 3-for-1 stock split on 25 August 2022. This will increase the number of shares to around 4 billion, increasing the model-estimated share price. O e. Tesla's market share price was $268.21 on 29 September 2022. After adjusting for the stock split above, the Holon model suggests that Tesla is under- valued, all other things remaining equal.
Expert Solution
steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Risk and Return
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS