Disclaimer: This model is for educational and demonstrative purposes only.

Tesla (TSLA) Valuation - Discounted Cash Flow (DCF) Model

1. Repository Objective

The central objective of this project is to calculate the Intrinsic Value of Tesla shares (TSLA) using the Discounted Cash Flow (DCF) method. The code seeks to determine if the stock is undervalued or overvalued in the current market, based on fundamental assumptions rather than just the stock exchange price.

2. The Model Stages (The "Core" of the Exercise)

The repository divides the valuation exercise into the following phases:

A. Data Collection and Assumptions

The code defines the critical input variables, which is essential given Tesla's volatility:

• Revenue Growth Rate: Aggressive vs. conservative projections for the next 5-10 years.
• Operating Margins (EBIT): The evolution of profitability as the company scales.
• Tax Rate: Future tax adjustments.

B. WACC Calculation (Weighted Average Cost of Capital)

We calculate the discount rate used to bring future cash flows to their present value:

• Cost of Debt: Interest paid by Tesla.
• Cost of Equity (Ke): Based on the Risk-Free Rate (usually US T-Bonds) and Tesla's Beta (systemic risk).

C. Cash Flow Projection (FCFF)

The exercise projects the Free Cash Flow to the Firm. The central formula used in the code is:

$$ FCFF = EBIT \times (1 - Tax Rate) + Depreciation - Capex - \Delta WorkingCapital $$

D. Terminal Value and Present Value

The code calculates Tesla's value in perpetuity (after the explicit projection period, usually 10 years) and discounts everything to the present day:

$$ Present Value = \sum_{t=1}^{n} \frac{FCFF_t}{(1 + WACC)^t} + \frac{Terminal Value}{(1 + WACC)^n} $$

4. Final Output

At the end of the notebook, the repository presents:

1. Target Price per Share: The fair value calculated by the model.
2. Margin of Safety: The percentage difference between the calculated value and the current market price.
3. Sensitivity Analysis: Tables showing how the stock price changes if growth is lower or if WACC is higher.

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How to Run

1. Just download the Excel file and open it in the Office app on your desktop.

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Disclaimer: This model is for educational and demonstrative purposes only.