Tesla is looking to expand its production for high capacity, Ask an Expert

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Tesla is looking to expand its production for high capacity batteries in Mexico. Elon Musk expects that the production plant will cost 3.25B Mexican pesos to start.

It will take one year to complete the factory so in the first year it will not generate any cash flows. The plant will generate 200M, 300M, 400M, 500M, 500M pesos in the subsequent five years respectively.

Additionally in the 6th year, Elon expects that the factory will be worth 4B pesos.

Currently the exchange rate is $1/13 Mexican Peso.

The expected annual inflation in the US is 29% and 5% in Mexico If the required rate of return is 10% in the Mexican currency, should Elon Musk invest in the project?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92864204

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