Stock and Their Valuation

1. Stock valuation - A comparison of estimated values and marketprices 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. 421,233,615 Shares FACEBOOK CLASS A COMMON STOCK 2013 2014 2012 (in millions) 2018 (in millions) 2016 (in millions) 2017 (in millions) 2015 (in millions) 18% (in (in millions) millions) 18% 18% 596 18% 18% Revenue growth rate Revenues - Total costs and expenses Income from operations (EBIT) - Taxes Net operating profit after taxes (NOPAT) Operating current assets Operating current liabilities NOWC Change in NOWC Net fixed assets (plant property & equipment) Change in net fixed assets + Depreciation and amortization Capital expenditure Free cash flow Present value of FCF Horizon value Present value of horizon value Total firm value 1 1 1