VALUATION OF FACEBOOK, BASED ON PROF.

ASWATH DAMODARAN
2011 2012E 2013E 2014E 2015E
DCF Base year 1 2 3 4
Assumptions:
Revenue growth rate 40.0% 40.0% 40.0% 40.0%
EBIT (Operating) margin 45.7% 44.6% 43.5% 42.5% 41.4%
Tax rate 40.0% 40.0% 40.0% 40.0% 40.0%
Increase in CAPEX + WC as % of sales 67% 67% 67% 67%
Cost of capital 11.1% 11.1% 11.1% 11.1%

Free cash flow to firm ($ millions):

Revenues 3,711 5,195 7,274 10,183 14,256
EBIT 1,695 2,318 3,167 4,325 5,903
EBIT(1-tax) 1,017 1,391 1,900 2,595 3,542
Increase in CAPEX + WC 995 1,392 1,949 2,729
FCFF 396 508 646 813
Terminal value

Present value:
Cumulative discount factor 0.9002 0.8104 0.7295 0.6567
PV of FCFF and TV 356 412 471 534

Value of firm 72,023.8

- Debt 1,088.9
+ Excess Cash 1,512.0
Value of equity 72,446.9
- Cost of equity options (after tax) 3,088.5 WACC Equity
Value of common equity 69,358.4 Market values $ 81,247.8
Pre-IPO number of shares (millions) 2,138.1 Weights in WACC 98.7%
Estimated value /share $ 32.44 Cost of Component 11.2%
Price talk $ 38.00
Price as % of value 117%
 2016E 2017E 2018E 2019E 2020E 2021E Terminal
5 6 7 8 9 10 year

40.0% 32.4% 24.8% 17.2% 9.6% 2.0% 2.0%

40.3% 39.3% 38.2% 37.1% 36.1% 35.0% 35.0%
40.0% 39.0% 38.0% 37.0% 36.0% 35.0% 35.0%
67% 67% 67% 67% 67% 67% 100%
11.1% 10.5% 9.8% 9.2% 8.6% 8.0% 8.0%

19,959 26,425 32,979 38,651 42,362 43,209 44,073

8,051 10,377 12,599 14,353 15,279 15,123 15,426
4,830 6,330 7,811 9,042 9,778 9,830 10,027
3,821 4,333 4,391 3,800 2,486 568 864
1,010 1,997 3,420 5,242 7,292 9,262 9,162
152,707

0.5912 0.5352 0.4872 0.4460 0.4106 0.3802 0.3802

597 1,069 1,666 2,338 2,995 3,522 58,064

Debt Preferred Capital

$ 1,088.9 $ - $ 82,336.7
1.3% 0.0% 100.0%
2.4% 7.1% 11.1%