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

Unlevered cash flows forecast facebooks unlevered

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Unformatted text preview: CC calculated above) to the present value. This should give you the market value of Facebook at the time of the IPO. Divide by the number of shares outstanding (include class B shares) to get the IPO price. Don't forget to account for the terminal value of Facebook. Once you have your final valuation, change some of your assumptions to see how your valuation changes. What are your "best case" and "worst case" valuations? 2. Multiples analysis For each of the 13 comparable companies, calculate the per share measures in the first table (i.e., sales, assets, EBITDA, EBIT, and earnings). For earnings, use the levered cash flow of the firm (EBITDA interest taxes). Once you have these measures, calculate the price-to-earnings ratios as defined in the second table. Use the most recent (2011) accounting data from Facebook to make value projections for each of the comparable firm multiples. That is, calculate Facebook's valuation based on the market valuation of each comparable firm. For instance, Amazon's PE ratio is 47.4. If we multiple 47.4 by Facebook's earnings ($1,342 million), we get a valuation of $63.7 billion. Do this for each comparable and each ratio. When you are done, look across the set of comparable firms and ratios and make as assessment of the valuations. In particular, which are relevant? Which are believable, and why? How do these valuations compare to the DCF? Does this increase or decrease the confidence of your earlier analysis. 3. Additional items to consider in our write-up a. Clearly state your valuation (Market value and price per share) for Facebook. Also indicate a confidence interval around your valuation (i.e., best/worst case), and state how you arrived at this confidence interval. b. Clearly describe how you arrived at a terminal value for Facebook. How did the terminal values assumptions affect your valuation? In particular, what was the effect of the growth rate and discount rates assumptions? c. Why did Facebook go public? Did it need the capital? What other considerations...
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