Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Why did the analysts add back stock expenses to get to
Transcribed Image Text:Before the offer, Microsoft created the following discounted cash flow valuation of LinkedIn.
in US $ Thousands
Net Revenue
Cost of
Revenue
Gross Profit
Sales and
Marketing
Product
Development
General and
Administrative
Depreciation
and
Amortization
Operating
Income
Free Cash
Flow (FCF)
EBIT
Less Taxes
(35% tax rate)
Add
Depreciation &
Amortization
Add Stock
Expense
Less Capital
Expenditures
Less
Intangibles
Unlevered
Free Cash Flow
Present Value
(WACC of 10%)
FY 16E
3,742,464
(500,860)
(599,430) (671,042)
3,241,604 3,970,961 4,714,643
(132,283)
(132,283)
46,299
(550,640) (587,919) (595,995)
550,640
580,398
FY 17E
(542,094) (612,367) (667,484) (719,033)
4,570,391
(8,308)
326,826
326,826
(1,276,256) (1,535,216) (1,781,941) (2,044,070) (2,319,453) (2,605,850) (2,898,763) (3,197,823)
Total PV of
Unlevered Free 27,184,735
Cash Flow
(1,004,897) (1,178,117) (1,332,746) (1,489,994) (1,647,819) (1,785,504) (1,915,629) (2,038,170)
Terminal Value Assumptions:
Growth: 4.6%
WACC: 10%
57,342
FY 18E
57,342
5,385,685
587,919
594,908
(709,920) (727,668) (654,901)
492,431
447,665
336,477
336,477
595,995
FY 19E
(20,070) (117,767) (232,547)
609,781
6,272,014
769,585
636,020
10,423,675
(742,402) (812,487)
(880,375) (974,363) (1,069,430)
5,529,612 6,412,894 7,360,785 8,332,756 9,354,245
664,421
664,421
(612,094) (637,107)
612,094
FY 20E
625,025
(671,274)
997,719
7,225,381 8,241,160
749,601
FY 21E
(766,204) (808,377) (844,466) (874,842)
637,107
FY 22E
640,651
9,307,119
1,042,311 1,496,661 1,982,547 2,526,239
1,042,311 1,496,661 1,982,547 2,526,239
(523,831) (693,892) (884,183)
(364,808)
865,517
(664,393) (691,351) (717,171)
664,393
656,667
FY 23E
1,267,205 1,588,633
691,351
(688,056) (705,257) (722,888)
673,084
1,930,202
717,171
689,911
(740,961)
2,308,177
Terminal
Value
986,416 1,089,549 1,184,459 20,898,681
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education