Problem%20set%20%232%20-%20facebook%20ipo%202012

The third is a value weighted index of all publicly

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Unformatted text preview: de if you so choose. It's up to you. Company Ticker Assets ($millions) Sales ($millions) Market value ($millions) FACEBOOK INC AMAZON.COM INC AOL INC APPLE INC CISCO SYSTEMS IN EBAY INC ELECTRONIC ARTS GOOGLE INC INTUIT INC LINKEDIN CORP MICROSOFT CORP RENREN INC -ADR YAHOO INC ZYNGA INC FB AMZN AOL AAPL CSCO EBAY EA GOOG INTU LNKD MSFT RENN YHOO ZNGA 6,331 25,278 2,825 176,064 91,759 27,320 5,491 72,574 4,684 874 121,271 1,278 14,783 2,517 3,711 48,077 2,202 156,508 46,061 11,652 4,143 37,905 4,151 522 73,723 118 4,984 1,140 ?? 78,761 1,424 626,550 84,503 39,019 5,279 209,850 17,133 6,394 256,375 1,384 19,195 6,790 Required Analysis Use both a discounted cash flow (DCF) and firm comparables method for valuing the IPO. For the DCF analysis, you will need to determine (1) the weighted average cost of capital (WACC) and (2) the future stream of unlevered cash flows Facebook is likely to produce. The multiples analysis requires that you pick a set of comparable companies (or company) most similar to Facebook, and using the market valuations of these companies (or company), estimate the value of Facebook. Your valuations should be done in an excel spreadsheet, which must be turned in with your assignment. I provide a template for you to use, although you are free to modify certain elements to suit your valuation. Your final write-up should contain some modified set of these tables (nicely formatted) to aid the written discussion. In particular, your write- up should be completely self-contained. I will refer to your excel spreadsheet only to verify calculations. 1. Discounted cash flow (DCF) analysis: Start by coming up with Facebook's weighted average cost of capital (WACC). Once you have this, come up with an estimate of the Facebook's future stream of unlevered cash flows, account for required capital expenditures, and then discount the residual operating cash flows (OCF) back to the present value. This will be your valuation. Cost of equity: use the capital asset pricing model (CAPM). You will need to choose a risk free rate, appropriate market ind...
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