The sheet lists some assumptions about the YearOverYear (YOY) growth of revenues and certain expenses for 20232032. While Twitter could still see higher growth in the shortrun, most analysts expect it to approach mature, steady state growth by the end of the decade. We are using the Percent of Sales forecasting method where we forecast the growth of sales (revenues) explicitly, but we assume that many items will be a certain percentage of sales (they grow with sales). Use the base case assumptions to build a forecast of net income (earnings) and then free cash flows of Twitter for the years 2023 to 2032. Specifically, start with forecasting revenues for each year and then cost of revenues, etc. like we did in capital budgeting until you eventually get to Free Cash Flows. Assume a tax rate of 21%. To simplify the analysis, ignore tax loss carryforwards and assume that any year with negative taxable income has a tax of zero. Beyond 2032, you will need to make an assumption to handle the mature part of Twitters lifecycle. a. Taking the free cash flows you forecast for 2032, assume that they will grow by 3% to 2033 and continue growing at 3% thereafter. b. Assume that the opportunity cost of capital for Twitter is 10%. You can treat all cash flows starting in 2033 and continuing onward as a growing perpetuity with a growth rate of 3%. By doing this, you will have what is called a terminal value or continuation value for Twitter as of mid2032 (see below that all cash flows are midyear, so this is one year before the first cash flow in the growing perpetuity). To avoid timing complexities, we will assume that you are valuing Twitter as of mid2022 (time zero, or now), and that cash flows occur in 12month intervals, so 2023 refers to exactly one year from time zero, in mid2023. Discount all cash flows back to the time zero (mid2022) using a 10% cost of capital and the NPV function in Excel. This is the total value of Twitter, which covers both the debt and equity. To arrive at a total equity value, subtract the debt amount. To calculate the price per (equity) share, you must divide the total equity value by the number of shares outstanding. Twitter had 780 million shares outstanding.

Assumptions in Model Revenue Growth Rate Total Cost of Revenue (\% of Rev) Research and Development (\% of Rev) Sales and Marketing (\% of Rev) General and Admin. (\% of Rev) Depreciation (\% of Rev) CapEx (\% of Rev) 202320%27%29%24%10%12%13%202418%26%27%23%10%12%13%202516%25%25%22%10%12%12%202614%24%23%21%10%12%12%202712%23%21%21%10%12%12%202810%22%20%21%10%12%12%20298%21%20%21%10%12%12%20307%20%20%21%10%12%12%20317%20%20%21%10%12%12%12% LongRunGrowthDiscountRateDebtoutstanding3%10%$2,966 Sensitivity Base Case YOY Revenue Growth Upside YOY Revenue Growth Downside YOY Revenue Growth 20%20%10%29%24%29%25%18%22%12%27%23%29%25%16%22%14%25%22%27%25%14%20%12%23%21%25%24%12%18%10%21%21%25%24%10%16%9%20%21%24%24%8%14%9%20%21%23%23%7%12%7%20%21%22%23%7%10%7%20%21%22%23%7%7%22%23%20%21% Base Case R\&D Base Case Sales \& Marketing High R\&D High Sales \& Marketing All figures are in millions 2022 included as Base Year for Rev growth 20232024 2025 20262027 2028 2029 2030 2031 2032 Revenue Cost of revenue Research and development Sales and marketing General and administrative EBITDA Depreciation Taxable Income Taxes Net Income Assumptions in Model Revenue Growth Rate Total Cost of Revenue (\% of Rev) Research and Development (\% of Rev) Sales and Marketing (\% of Rev) General and Admin. (\% of Rev) Depreciation (\% of Rev) CapEx (\% of Rev) 202320%27%29%24%10%12%13%202418%26%27%23%10%12%13%202516%25%25%22%10%12%12%202614%24%23%21%10%12%12%202712%23%21%21%10%12%12%202810%22%20%21%10%12%12%20298%21%20%21%10%12%12%20307%20%20%21%10%12%12%20317%20%20%21%10%12%12%12% LongRunGrowthDiscountRateDebtoutstanding3%10%$2,966 Sensitivity Base Case YOY Revenue Growth Upside YOY Revenue Growth Downside YOY Revenue Growth 20%20%10%29%24%29%25%18%22%12%27%23%29%25%16%22%14%25%22%27%25%14%20%12%23%21%25%24%12%18%10%21%21%25%24%10%16%9%20%21%24%24%8%14%9%20%21%23%23%7%12%7%20%21%22%23%7%10%7%20%21%22%23%7%7%22%23%20%21% Base Case R\&D Base Case Sales \& Marketing High R\&D High Sales \& Marketing All figures are in millions 2022 included as Base Year for Rev growth 20232024 2025 20262027 2028 2029 2030 2031 2032 Revenue Cost of revenue Research and development Sales and marketing General and administrative EBITDA Depreciation Taxable Income Taxes Net Income