Calculate the discounted cash flow valuation model and then compare the calculations with the multiple valuation models.
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Calculate the discounted cash flow valuation model and then compare the calculations with the multiple valuation models.
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Baidu (in RMB millions) Pay-for-performance Online advertising subtotal- online markeing services Enterprise search Revenue Forecast Portal search Total Revenue Net Revenue Pro-Forma Income Statement (in RMB millions) Net revenue Cost of revenue Gross profit SG&A R&D Share-based compensation Operating profit Other income EBT Taxes Net income DISCOUNTED CASH FLOW (DCF) (in RMB millions) Operating profit Taxes Depreciation Amortization of intangible assets Share-based compensation Investment in working capital Capital expenditures Free cash flow Baidu DCF Valuatin Model Assumption: 2002A 1.9 2.4 4.3 1.7 5.0 11.0 10.5 2002A NPV of five-year FCF forecasts Terminal value in year 2010 PV of Terminal value Net cash/(debt) Equity value (RMB millions) Exchange rate (RMB/US $) Equity value (US$ millions) Number of shares outstanding (millions) Equity value per share ($) 2002A Limited growth in investment in working capital and net cash (in RMB millions) 2002A Year Free cash flow Discount free cash flow 2003A 26.9 4.8 31.7 2.8 6 40.5 38.7 2003A 2003A 2004A 81.2 25.7 106.9 8 2.6 117.5 111.0 2003A 2004A 111.0 -33 78.0 -39 -11.4 -16.5 11.1 1.5 12.6 -0.5 12.1 2004A 2005E 216.7 60.5 277.2 10.7 2004A 1.7 289.6 271.0 Risk-fre rate of 4%, market risk premium of 6%, and beta of 1.5; cost of unlevered equity-4% +6% *1.5=13% no leverage; weighted cost of capital = Long-run terminal growth rate (in free cash flows] = 2005E 271.0 -80 191.0 -99 -31 -31 30 6 36 -5 31 2005E 2005E 2006E 532 15 1 548.0 512.0 2006E 512.0 -137 375.0 -153 -48 -44 130 14 144 -15 129 2006E 2006E 2007E 797 16 1 814.0 762.0 2007E 762.0 -187 575.0 -221 -76 -50 228 22 250 -30 220 2007E 2007E 2008E 1099 17 0 1116.0 1044.0 2008E 1044.0 -246 798.0 -313 -106 -52 327 31 358 -62 296 2008E 2008E 2009E 1516 17 0 1533.0 1434.0 2009E 1434.0 -320 1114.0 -364 -138 -55 557 40 597 -98 499 2009E 2009E 2010E 1843 18 0 1861.0 1750.0 2010E 1750.0 -392 1358.0 -411 -165 -58 724 50 774 -125 649 2010E 2010E Baidu (in RMB millions) Pay-for-performance Online advertising subtotal- online markeing services Enterprise search Revenue Forecast Portal search Total Revenue Net Revenue Pro-Forma Income Statement (in RMB millions) Net revenue Cost of revenue Gross profit SG&A R&D Share-based compensation Operating profit Other income EBT Taxes Net income DISCOUNTED CASH FLOW (DCF) (in RMB millions) Operating profit Taxes Depreciation Amortization of intangible assets Share-based compensation Investment in working capital Capital expenditures Free cash flow Baidu DCF Valuatin Model Assumption: 2002A 1.9 2.4 4.3 1.7 5.0 11.0 10.5 2002A NPV of five-year FCF forecasts Terminal value in year 2010 PV of Terminal value Net cash/(debt) Equity value (RMB millions) Exchange rate (RMB/US $) Equity value (US$ millions) Number of shares outstanding (millions) Equity value per share ($) 2002A Limited growth in investment in working capital and net cash (in RMB millions) 2002A Year Free cash flow Discount free cash flow 2003A 26.9 4.8 31.7 2.8 6 40.5 38.7 2003A 2003A 2004A 81.2 25.7 106.9 8 2.6 117.5 111.0 2003A 2004A 111.0 -33 78.0 -39 -11.4 -16.5 11.1 1.5 12.6 -0.5 12.1 2004A 2005E 216.7 60.5 277.2 10.7 2004A 1.7 289.6 271.0 Risk-fre rate of 4%, market risk premium of 6%, and beta of 1.5; cost of unlevered equity-4% +6% *1.5=13% no leverage; weighted cost of capital = Long-run terminal growth rate (in free cash flows] = 2005E 271.0 -80 191.0 -99 -31 -31 30 6 36 -5 31 2005E 2005E 2006E 532 15 1 548.0 512.0 2006E 512.0 -137 375.0 -153 -48 -44 130 14 144 -15 129 2006E 2006E 2007E 797 16 1 814.0 762.0 2007E 762.0 -187 575.0 -221 -76 -50 228 22 250 -30 220 2007E 2007E 2008E 1099 17 0 1116.0 1044.0 2008E 1044.0 -246 798.0 -313 -106 -52 327 31 358 -62 296 2008E 2008E 2009E 1516 17 0 1533.0 1434.0 2009E 1434.0 -320 1114.0 -364 -138 -55 557 40 597 -98 499 2009E 2009E 2010E 1843 18 0 1861.0 1750.0 2010E 1750.0 -392 1358.0 -411 -165 -58 724 50 774 -125 649 2010E 2010E
Expert Answer:
Answer rating: 100% (QA)
To calculate the discounted cash flow DCF valuation for Baidu we will use the provided data on free cash flows and apply the assumptions given Lets go ... View the full answer
Related Book For
Strategic Management An Integrated Approach
ISBN: 978-1111825843
10th edition
Authors: Charles W. L. Hill, Gareth R. Jones
Posted Date:
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