Calculate the discounted cash flow valuation model and then compare the calculations with the multiple valuation models.

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