Did Microsoft overpay for LinkedIn Why or why not in US $ Thousands FY 16E FY 17E FY 18E FY 19E FY 20E FY 21E FY 22E FY 23E Terminal Value Net Revenue 3,742,464 4,570,391 5,385,685 6,272,014 7,225,381 8,241,160 9,307,119 10,423,675 Cost of Revenue (500,860) (599,430) (671,042) (742,402) (812,487) (880,375) (974,363) (1,069,430) Gross Profit 3,241,604 3,970,961 4,714,643 5,529,612 6,412,894 7,360,785 8,332,756 9,354,245 Sales and Marketing (1,276,256) (1,535,216) (1,781,941) (2,044,070) (2,319,453) (2,605,850) (2,898,763) (3,197,823) Product Development (1,004,897) (1,178,117) (1,332,746) (1,489,994) (1,647,819) (1,785,504) (1,915,629) (2,038,170) General and Administrative (542,094) (612,367) (667,484) (719,033) (766,204) (808,377) (844,466) (874,842) Depreciation and Amortization (550,640) (587,919) (595,995) (612,094) (637,107) (664,393) (691,351) (717,171) Operating Income (132,283) 57,342 336,477 664,421 1,042,311 1,496,661 1,982,547 2,526,239 Free Cash Flow (FCF) EBIT (132,283) 57,342 336,477 664,421 1,042,311 1,496,661 1,982,547 2,526,239 Less Taxes (35 tax rate) 46,299 (20,070) (117,767) (232,547) (364,808) (523,831) (693,892) (884,183) Add Depreciation Amortization 550,640 587,919 595,995 612,094 637,107 664,393 691,351 717,171 Add Stock Expense 580,398 594,908 609,781 625,025 640,651 656,667 673,084 689,911 Less Capital Expenditures (709,920) (727,668) (654,901) (671,274) (688,056) (705,257) (722,888) (740,961) Less Intangibles (8,308) Unlevered Free Cash Flow 326,826 492,431 769,585 997,719 1,267,205 1,588,633 1,930,202 2,308,177 Present Value (WACC of 10 ) 326,826 447,665 636,020 749,601 865,517 986,416 1,089,549 1,184,459 20,898,681 Total PV of Unlevered Free Cash Flow 27,184,735 Terminal Value Assumptions Growth 4 6 WACC 10

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Did Microsoft overpay for LinkedIn  Why or why not  in US $ Thousands FY 16E FY 17E FY 18E FY 19E FY 20E FY 21E FY 22E FY 23E Terminal Value Net Revenue 3,742,464 4,570,391 5,385,685 6,272,014 7,225,381 8,241,160 9,307,119 10,423,675 Cost of Revenue (500,860) (599,430) (671,042) (742,402) (812,487) (880,375) (974,363) (1,069,430) Gross Profit 3,241,604 3,970,961 4,714,643 5,529,612 6,412,894 7,360,785 8,332,756 9,354,245 Sales and Marketing (1,276,256) (1,535,216) (1,781,941) (2,044,070) (2,319,453) (2,605,850) (2,898,763) (3,197,823) Product Development (1,004,897) (1,178,117) (1,332,746) (1,489,994) (1,647,819) (1,785,504) (1,915,629) (2,038,170) General and Administrative (542,094) (612,367) (667,484) (719,033) (766,204) (808,377) (844,466) (874,842) Depreciation and Amortization (550,640) (587,919) (595,995) (612,094) (637,107) (664,393) (691,351) (717,171) Operating Income (132,283) 57,342 336,477 664,421 1,042,311 1,496,661 1,982,547 2,526,239 Free Cash Flow (FCF) EBIT (132,283) 57,342 336,477 664,421 1,042,311 1,496,661 1,982,547 2,526,239 Less Taxes (35  tax rate) 46,299 (20,070) (117,767) (232,547) (364,808) (523,831) (693,892) (884,183) Add Depreciation   Amortization 550,640 587,919 595,995 612,094 637,107 664,393 691,351 717,171 Add Stock Expense 580,398 594,908 609,781 625,025 640,651 656,667 673,084 689,911 Less Capital Expenditures (709,920) (727,668) (654,901) (671,274) (688,056) (705,257) (722,888) (740,961) Less Intangibles (8,308)               Unlevered Free Cash Flow 326,826 492,431 769,585 997,719 1,267,205 1,588,633 1,930,202 2,308,177 Present Value (WACC of 10 ) 326,826 447,665 636,020 749,601 865,517 986,416 1,089,549 1,184,459 20,898,681 Total PV of Unlevered Free Cash Flow 27,184,735 Terminal Value Assumptions  Growth  4 6  WACC  10

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in US $ Thousands	FY 16E	FY 17E	FY 18E	FY 19E	FY 20E	FY 21E	FY 22E	FY 23E	Terminal Value
Net Revenue	3,742,464	4,570,391	5,385,685	6,272,014	7,225,381	8,241,160	9,307,119	10,423,675
Cost of Revenue	(500,860)	(599,430)	(671,042)	(742,402)	(812,487)	(880,375)	(974,363)	(1,069,430)
Gross Profit	3,241,604	3,970,961	4,714,643	5,529,612	6,412,894	7,360,785	8,332,756	9,354,245

Sales and Marketing	(1,276,256)	(1,535,216)	(1,781,941)	(2,044,070)	(2,319,453)	(2,605,850)	(2,898,763)	(3,197,823)
Product Development	(1,004,897)	(1,178,117)	(1,332,746)	(1,489,994)	(1,647,819)	(1,785,504)	(1,915,629)	(2,038,170)
General and Administrative	(542,094)	(612,367)	(667,484)	(719,033)	(766,204)	(808,377)	(844,466)	(874,842)
Depreciation and Amortization	(550,640)	(587,919)	(595,995)	(612,094)	(637,107)	(664,393)	(691,351)	(717,171)
Operating Income	(132,283)	57,342	336,477	664,421	1,042,311	1,496,661	1,982,547	2,526,239

Free Cash Flow (FCF)
EBIT	(132,283)	57,342	336,477	664,421	1,042,311	1,496,661	1,982,547	2,526,239
Less Taxes (35% tax rate)	46,299	(20,070)	(117,767)	(232,547)	(364,808)	(523,831)	(693,892)	(884,183)
Add Depreciation & Amortization	550,640	587,919	595,995	612,094	637,107	664,393	691,351	717,171
Add Stock Expense	580,398	594,908	609,781	625,025	640,651	656,667	673,084	689,911
Less Capital Expenditures	(709,920)	(727,668)	(654,901)	(671,274)	(688,056)	(705,257)	(722,888)	(740,961)
Less Intangibles	(8,308)	-	-	-	-	-	-	-
Unlevered Free Cash Flow	326,826	492,431	769,585	997,719	1,267,205	1,588,633	1,930,202	2,308,177
Present Value (WACC of 10%)	326,826	447,665	636,020	749,601	865,517	986,416	1,089,549	1,184,459	20,898,681
Total PV of Unlevered Free Cash Flow	27,184,735
Terminal Value Assumptions:
Growth: 4.6%
WACC: 10%