1. Stock valuation - A comparison of estimated values and market prices

Slim Perkins, a business journalist, is a recent hire at his firm. Since he joined the firm, he has been following Facebook Inc.'s (FB) initial public offering (IPO) and the stock's performance. His task is to estimate Facebook's fair market value, also referred to as "intrinsic" value, and compare this value with the current stock price, and recommend a buy, sell, or hold rating to investors. Slim pulls the company's consolidated financial statements to collect relevant data on the company's historical financial performance.

He notices that the company assumes a 45% marginal tax rate after the IPO, and mentions that the company projects that user rates and revenue growth will decline over time.

Slim starts his evaluation by calculating ratios of costs and expenses to revenues, interest expense to revenues, and others that will form the set of assumptions in his analysis which will be used to calculate free cash flows.