Read the attached WORD document called “2020 Cruise-Tesla Case” with care andanswer the questions in it.
Please watch “Multiples for Public Companies” in the Panopto folder on your left. You should pick at least four comparable companies (i.e., comparable in some way to Cruise), at least one of which is conceptually related, but is not actually a traditional auto company. For example, you might pick Ford, GM, Uber or Amazon, Lyft, or Zoom Video, because they are high-tech companies. Your choice— but be sure to explain your reasoning.
This news article might give you some ideas about the EV industry 2021 January Cruise and Microsoft link up
In choosing your comparables, which are known in accounting as “guideline companies,” and in our text as “yardstick companies,” you can look at the nature of the business, as well as beta, ROE, and other financial ratios. They help you choose the comparables, and then you proceed to useand weigh (weighted average) P/E, P/B,P/S and DCF.
Note: I am the author of the attached case. I intend to publish it, I welcome any suggestions to this draft version.
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I attach two very detailed spreadsheets about TSLA. You can use it to see the likely cash flows in future years, which you will use for the DCF (discounted cash flow) part of the valuation.
I also attach a chapter on business valuation that I used in the Forensic Accounting course that I teach (ACCT 412/601). The document name is ACCT 412 601 Crumbley Forensic Accting Ch 17. I think it is more approachable and relevant to this assignment than our book’s chapters 10 and 11.
This assignment is a very significant portion of the course grade. Therefore, your team need to begin work on this now! I am willing to see at least one draft (submit drafts right here in the ASSIGNMENT FOLDER, I have set it to allow unlimited re-submissions. Always have all names on the first page. If someone does nothing, note that on the first page, also).
QUICK AND DIRTY ACTION PLAN
1-Read the case, it is the fifth attachment. We will skip the DCF approach, to save you time.
2-Read the first attachment, to see a clean approach to using multiples.
3-Open the second attachment. It has the numbers you need.
4-From your comparables list, apply P/Earnings, P/Sales and P/Book value.
5-State the value of Cruise, by averaging those three metrics.