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

Use both a discounted cash flow and earnings multiple

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Unformatted text preview: the worksheets contain information from the SEC filings that you might find useful. I also posted for your consideration the SEC filings that established the initial and final offer prices. Along with the specific questions I ask below, also consider in your final write-up whether the Morgan Stanley valuation was sound. In particular, did the market get it wrong? Why was Morgan Stanley so off the mark? Also be sure to highlight the key assumptions that drive your valuation. In particular, your write-up should include a sensitivity analysis showing how your valuation changes when you vary these key assumptions. Financial data Your research team (me) has already assembled the necessary financial data needed to do the valuation. The data are contained in two separate excel files and come from two reliable data aggregators: S&P Compustat for accounting data and the Center for Research in Securities Prices (CRSP) for market data. The first file (fb and comparables actg) contains balance sheet and income statement data for Facebook and thirteen comparable companies that may be relevant for your analysis. The second file (fb and comparable returns) contains monthly returns for all of the companies in the first file, the 3-month T-bill rate, and three market indices. The first index is the S&P500. The second is an equal-weighted index of all publicly traded companies. The third is a value-weighted index of all publicly traded companies. Definitions for each of the variables names in these two files are provided in this appendix below. The 13 "comparable" companies listed below are drawn from the Facebook prospectus; they are the companies that Facebook considers their competitors or peer companies. You are not required to use all 13 companies in your analysis, but if you don't, state why. Also, although there may be other relevant companies not included here, there is no need to identify them or otherwise use them in the analysis. But you can go beyond the information I provi...
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