page 21

page 22

Please provide sufficient answers. Thanks a lot. I will high rate the answers.

Part1. Facebook Case & Goodwill Impairments You are working as an intern at Berkshire Hathaway Inc. Your boss, Warren Buffett, is planning to make investment on Facebook stocks. Warren Buffet wants to evaluate some potential risk of Facebook investments and asked you to write a report (so report on potential risk, i.e., downside of FB investment) because Warren Buffet saw your recent education at PKU GSM from your resume. Warrant Buffet promised you to give 1% of his entire net wealth to you, if you write a really good report. Now, you have incentive to write a really good report. While reading Facebook financial statements, you discovered that Facebook acquired WhatsApp on February 19, 2014. Appendix A. includes information on Facebook-WhatsApp deal. 1. You want to evaluate Facebook's WhatsApp acquisition and see whether there are any risks coming from past M&A deals. 2) Please, write your evaluation of Facebook's WhatsApp acquisition at the post-acquisition perspective (i.e., evaluate the deal today). Assume that 12/31/2019 is the most recent available financial statements and Facebook only has one reporting unit (or cash-generating unit). Also, let's assume that the number of shares outstanding on 12/31/2019 is 500 million shares and the share price is $200 per share. Most recent financial statement information of Facebook is provided in page 21 and 22. Toyota's Blance Sheet, 2013 2015 FY 2013 03/31/2013 FY 2014 03/31/2014 FY 2015 03/31/2015 In Billions of 12 Months Ending Assets + Cash & Near Cash Items + Short-Term Investments + Accounts & Notes Receivable + Inventories + Other Current Assets Total Current Assets + LT Investments & LT Receivables + Net Fixed Assets + Gross Fixed Assets - Accumulated Depreciation + Other Long-Term Assets Total Long-Term Assets Total Assets 1,718.3 1,552.4 7,089.3 1,715.8 1,709.1 13,784.9 12, 120.3 6,851.2 18,223.6 11.372.4 2,726.8 21,698.4 35,483.3 2,041.2 2,227.1 7,665.2 1,894.7 1,889.6 15,717.7 14,867.3 7,641.3 19,764.8 12, 123.5 3,211.1 25,719.8 41,437.5 2,284.6 2.931.4 8,378.5 2.137.6 2,204.3 17,936.4 16,834.7 9,295.7 22,364.4 13,068.7 3,663.1 29,793.4 47,729.8 Liabilities & Shareholders' Equity + Accounts Payable + Short-Term Borrowings + Other Short-Term Liabilities Total Current Liabilities + Long-Term Borrowings + Other Long-Term Liabilities Total Long-term Liabilities Total Liabilities + Total Preferred Equity + Minority Interest + Share Capital & APIC + Retained Earnings & Other Equity Total Equity Total Liabilities & Equity 2,113.8 6,794.0 4,004.8 12,912.5 7,337.8 2,460.1 9,797.9 22,710.5 0.0 624.8 948.1 11,199.9 12,772.9 35,483.3 2,213.2 7,780.5 4,687.0 14,680.7 8,546.9 2,990.9 11,537.8 26,218.5 2,410.6 8,963.5 5,057.4 16,431.5 10,014.4 3,636.6 13,651.0 30,082.5 0.0 0.0 749.8 948.4 13,520.8 15,219.0 41,437.5 859.2 944.1 15,844.0 17,647.3 47,729.8 Note: LT = Long Term; APIC = Additional Paid-in Capital. Source: Bloomberg L. P., "Balance Sheet for Toyota 2013-2015," Bloomberg Database, accessed July 6, 2015. Toyota's Income Statement, 2013 2015 In Billions of * 12 Months Ending Total Operating Revenue (Japan) Revenue - Cost of Revenue Gross Profit + Other Operating Revenue - Operating Expenses Operating Income - Interest Expenses - Foreign Exchange Losses (Gains) - Net Non-operating Losses (Gains) Pretax Income - Income Tax Expenses Income before XO Items - Extraordinary Loss Net of Tax - Minority Interests Net Income - Total Cash Preferred Dividends - Other Adjustments Net Income Avail. to Common Shareholders FY 2013 03/31/2013 22,064.2 22,064.2 18,641.0 3,423.2 0.0 2,102.3 1,320.9 23.0 -5.6 -331.7 1,635.2 551.7 1,083.5 0.0 121.3 962.2 0.0 0.0 962.2 FY 2014 03/31/2014 25,691.9 25,691.9 20,801.1 4,890.8 0.0 2,598.7 2,292.1 19.6 -50.3 -436.7 2,759.5 767.8 1,991.6 FY 2015 03/31/2015 27,234.5 27,234.5 21,841.7 5,392.8 0.0 2,642.3 2,750.6 22.9 -88.1 -385.5 3,201.4 893.5 2,307.9 0.0 134.6 2,173.3 0.0 0.0 2,173.3 0.0 168.5 1,823.1 0.0 0.0 1,823.1 Basic EPS before Abnormal Items Basic EPS before Xo Items Basic EPS Basic Weighted Avg. Shares Diluted EPS before Abnormal Items Diluted EPS before XO Items Diluted EPS Diluted Weighted Avg. Shares 303.82 303.82 303.82 3,166.9 303.78 303.78 303.78 3,167.2 575.30 575.30 575.30 3,169.0 574.92 574.92 574.92 3,170.9 688.02 688.02 688.02 3,158.9 687.66 687.66 687.66 3,160.4 * except marked as EPS Note: XO Items = Extraordinary Items, EPS = Earnings per Share. Source: Bloomberg L. P., Income Statement for Toyota 20132015," Bloomberg Database, accessed July 6, 2015. Part1. Facebook Case & Goodwill Impairments You are working as an intern at Berkshire Hathaway Inc. Your boss, Warren Buffett, is planning to make investment on Facebook stocks. Warren Buffet wants to evaluate some potential risk of Facebook investments and asked you to write a report (so report on potential risk, i.e., downside of FB investment) because Warren Buffet saw your recent education at PKU GSM from your resume. Warrant Buffet promised you to give 1% of his entire net wealth to you, if you write a really good report. Now, you have incentive to write a really good report. While reading Facebook financial statements, you discovered that Facebook acquired WhatsApp on February 19, 2014. Appendix A. includes information on Facebook-WhatsApp deal. 1. You want to evaluate Facebook's WhatsApp acquisition and see whether there are any risks coming from past M&A deals. 2) Please, write your evaluation of Facebook's WhatsApp acquisition at the post-acquisition perspective (i.e., evaluate the deal today). Assume that 12/31/2019 is the most recent available financial statements and Facebook only has one reporting unit (or cash-generating unit). Also, let's assume that the number of shares outstanding on 12/31/2019 is 500 million shares and the share price is $200 per share. Most recent financial statement information of Facebook is provided in page 21 and 22. Toyota's Blance Sheet, 2013 2015 FY 2013 03/31/2013 FY 2014 03/31/2014 FY 2015 03/31/2015 In Billions of 12 Months Ending Assets + Cash & Near Cash Items + Short-Term Investments + Accounts & Notes Receivable + Inventories + Other Current Assets Total Current Assets + LT Investments & LT Receivables + Net Fixed Assets + Gross Fixed Assets - Accumulated Depreciation + Other Long-Term Assets Total Long-Term Assets Total Assets 1,718.3 1,552.4 7,089.3 1,715.8 1,709.1 13,784.9 12, 120.3 6,851.2 18,223.6 11.372.4 2,726.8 21,698.4 35,483.3 2,041.2 2,227.1 7,665.2 1,894.7 1,889.6 15,717.7 14,867.3 7,641.3 19,764.8 12, 123.5 3,211.1 25,719.8 41,437.5 2,284.6 2.931.4 8,378.5 2.137.6 2,204.3 17,936.4 16,834.7 9,295.7 22,364.4 13,068.7 3,663.1 29,793.4 47,729.8 Liabilities & Shareholders' Equity + Accounts Payable + Short-Term Borrowings + Other Short-Term Liabilities Total Current Liabilities + Long-Term Borrowings + Other Long-Term Liabilities Total Long-term Liabilities Total Liabilities + Total Preferred Equity + Minority Interest + Share Capital & APIC + Retained Earnings & Other Equity Total Equity Total Liabilities & Equity 2,113.8 6,794.0 4,004.8 12,912.5 7,337.8 2,460.1 9,797.9 22,710.5 0.0 624.8 948.1 11,199.9 12,772.9 35,483.3 2,213.2 7,780.5 4,687.0 14,680.7 8,546.9 2,990.9 11,537.8 26,218.5 2,410.6 8,963.5 5,057.4 16,431.5 10,014.4 3,636.6 13,651.0 30,082.5 0.0 0.0 749.8 948.4 13,520.8 15,219.0 41,437.5 859.2 944.1 15,844.0 17,647.3 47,729.8 Note: LT = Long Term; APIC = Additional Paid-in Capital. Source: Bloomberg L. P., "Balance Sheet for Toyota 2013-2015," Bloomberg Database, accessed July 6, 2015. Toyota's Income Statement, 2013 2015 In Billions of * 12 Months Ending Total Operating Revenue (Japan) Revenue - Cost of Revenue Gross Profit + Other Operating Revenue - Operating Expenses Operating Income - Interest Expenses - Foreign Exchange Losses (Gains) - Net Non-operating Losses (Gains) Pretax Income - Income Tax Expenses Income before XO Items - Extraordinary Loss Net of Tax - Minority Interests Net Income - Total Cash Preferred Dividends - Other Adjustments Net Income Avail. to Common Shareholders FY 2013 03/31/2013 22,064.2 22,064.2 18,641.0 3,423.2 0.0 2,102.3 1,320.9 23.0 -5.6 -331.7 1,635.2 551.7 1,083.5 0.0 121.3 962.2 0.0 0.0 962.2 FY 2014 03/31/2014 25,691.9 25,691.9 20,801.1 4,890.8 0.0 2,598.7 2,292.1 19.6 -50.3 -436.7 2,759.5 767.8 1,991.6 FY 2015 03/31/2015 27,234.5 27,234.5 21,841.7 5,392.8 0.0 2,642.3 2,750.6 22.9 -88.1 -385.5 3,201.4 893.5 2,307.9 0.0 134.6 2,173.3 0.0 0.0 2,173.3 0.0 168.5 1,823.1 0.0 0.0 1,823.1 Basic EPS before Abnormal Items Basic EPS before Xo Items Basic EPS Basic Weighted Avg. Shares Diluted EPS before Abnormal Items Diluted EPS before XO Items Diluted EPS Diluted Weighted Avg. Shares 303.82 303.82 303.82 3,166.9 303.78 303.78 303.78 3,167.2 575.30 575.30 575.30 3,169.0 574.92 574.92 574.92 3,170.9 688.02 688.02 688.02 3,158.9 687.66 687.66 687.66 3,160.4 * except marked as EPS Note: XO Items = Extraordinary Items, EPS = Earnings per Share. Source: Bloomberg L. P., Income Statement for Toyota 20132015," Bloomberg Database, accessed July 6, 2015