final assignments

profiletn2019
FI305PartII-DCF.pdf

Facebook 10-Year Discounted Cash Flow (in millions)

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2030+ Growth Rate 26.34% 19.86% 16.60% 16.60% 16.60% 16.60% 16.60% 16.60% 16.60% 16.60% 3% Revenue $84,820.00 $107,160.00 $128,441.00 $149,762.21 $174,622.73 $203,610.11 $237,409.38 $276,819.34 $322,771.35 $376,351.40 $438,825.73 COGS $15,518.00 $19,874.00 $24,360.00 $28,454.82 $33,178.32 $38,685.92 $45,107.78 $52,595.67 $61,326.56 $71,506.77 $83,376.89 Gross Profit $69,302.00 $87,286.00 $104,081.00 $121,307.39 $141,444.41 $164,924.19 $192,301.60 $224,223.67 $261,444.79 $304,844.63 $355,448.84 Operating Expenses $37,572.00 $49,237.00 $60,334.00 $72,784.43 $84,866.65 $98,954.51 $115,380.96 $134,534.20 $156,866.88 $182,906.78 $213,269.30 Operating Income $31,730.00 $38,049.00 $43,747.00 $48,522.95 $56,577.77 $65,969.67 $76,920.64 $89,689.47 $104,577.92 $121,937.85 $142,179.54 Depreciation $6,856.00 $9,603.00 $14,149.00 $10,548.00 $11,792.88 $13,037.76 $14,282.64 $15,527.52 $16,772.40 $18,017.28 $19,262.16 Stock-Based Compensation $6,733.00 $7,765.00 $9,318.00 $10,864.79 $12,668.34 $14,771.29 $17,223.32 $20,082.39 $23,416.07 $27,303.14 $31,835.46 Tax $3,987.00 $7,257.00 $8,579.00 $8,976.75 $10,466.89 $12,204.39 $14,230.32 $16,592.55 $19,346.91 $22,558.50 $26,303.21 Net Income $27,743.00 $30,792.00 $35,168.00 $39,546.21 $46,110.88 $53,765.28 $62,690.32 $73,096.92 $85,231.00 $99,379.35 $115,876.32 EBITDA $45,319.00 $55,417.00 $67,214.00 $69,935.74 $81,038.99 $93,778.72 $108,426.60 $125,299.38 $144,766.39 $167,258.27 $193,277.15 Operating cash flow $48,188.00 $57,763.00 $72,784.00 $71,507.00 $82,364.98 $94,612.09 $108,478.92 $124,234.35 $142,191.87 $162,717.05 $186,236.10

Net working capital Initial NWC (investor.fb.com) $53,855.00 $68,039.40 $81,551.40 $95,088.94 $110,873.70 $129,278.73 $150,739.00 $175,761.68 $204,938.12 $238,957.85 $278,624.85 Total Change NWC from year to year $14,184.40 $13,512.00 $13,537.53 $15,784.76 $18,405.03 $21,460.27 $25,022.67 $29,176.44 $34,019.73 $39,667.00

Capital Spending Predicted Capital Spending -$18,926.00 -$22,384.00 -$25,842.00 -$29,300.00 -$32,758.00 -$36,216.00 -$39,674.00 -$43,132.00 -$46,590.00 -$50,048.00 -$53,506.00

Free CF $29,262.00 $21,194.60 $33,430.00 $28,669.46 $33,822.22 $39,991.06 $47,344.65 $56,079.67 $66,425.43 $78,649.32 $93,063.10 $95,854.99

NPV $284,587.11 $1,509,527.41 Terminal Value of Company $617,522.99 Value of the Company $902,110.10

Shares Outstanding $2,873.00

Price per Share $314.00 Current Stock Price $280.00 Stock valuation 112.14%

Our discounted cash flow model shows that Facebook is currently undervalued by about $34 dollars per stock. Our assumptions demonstrate how Facebook is predicted to have incredible growth over the next 10 years, so an investment today would have great chances of providing a large yield in the future.

15 -53506

Year Capital Spending 14 -50048

2030 15 13 -46590

2029 14 12 -43132

2028 13 11 -39674

2027 12 10 -36216

2026 11 9 -32758

2025 10 8 -29300

2024 9 7 -25842

2023 8 6 -22384

2022 7 5 -18926

2021 6 4

2020 5 3

2019 -$15,102.00 4 2

2018 -$13,915.00 3 1

2017 -$6,733.00 2 0

2016 -$4,491.00 1

2015 -$2,523.00 0