Create a power point presentation advising Tesla’s Board on the Solar City acquisition benefits, risks, and
valuation.
IMPORTANT PROVIDE THE EXCEL SPREADSHEET WORK FOR ALL WORK
(1) Introduction: Summary of the proposed Tesla Solar City Acquisition (10 pts)
(2) Financial Statement Analysis: Provide a summary of the Solar City business model and financial
performance from 2014 through 2016. Analyze growth, profitability, working capital, liquidity and financial
leverage ratio trends using the data in the case. (15 pts)
(3) Build vs Buy: Discuss the strategic benefits or drawbacks of whether Tesla should build its own lithium ion
battery factory capacity, contract batteries from Solar City, or acquire Solar City to obtain lithium ion battery
supply capacity. Use Porter’s Five Forces and the Ansoff Matrix in your answer. (15 pts)
(4) Projections and Valuation Methods: Provide a valuation of Solar City using DCF and one of the additional
metrics studied this semester which you believe is most appropriate (Dividend Discount Models, EV/EBITDA,
EV/Sales, P/E) (20 pts)
(5) M&A Opinion: Explain whether the proposed offer by Tesla to purchase Solar City stock at $29.35 per share
is reasonable. Explain why or why not with your valuation data. Specifically discuss whether you agree with
proposed cost synergies of 20% and other strategic benefits of the deal. (15 pts)
(6) Capital Structure: Discuss whether Tesla should use debt or stock to make an acquisition of Solar City.
Specifically mention two benefits and two drawbacks of using equity and debt financing for the acquisition for
Tesla (the acquirer). (15 pts)
(7) Conclusion: Do you recommend the Solar City acquisition to Tesla’s Board? (10 pts
Sample Solution