VALUATION OF FACEBOOK, BASED ON PROF.

ASWATH DAMODARAN
2011
2012E
2013E
2014E
DCF
Base year
1
2
3
Assumptions:
Revenue growth rate
40.0%
40.0%
40.0%
EBIT (Operating) margin
45.7%
44.6%
43.5%
42.5%
Tax rate
40.0%
40.0%
40.0%
40.0%
Increase in CAPEX + WC as % of sales
67%
67%
67%
Cost of capital
11.1%
11.1%
11.1%
Free cash flow to firm ($ millions):
Revenues
EBIT
EBIT(1-tax)
Increase in CAPEX + WC
FCFF
Terminal value

3,711
1,695
1,017

Present value:
Cumulative discount factor
PV of FCFF and TV
Value of firm
- Debt
+ Excess Cash
Value of equity
- Cost of equity options (after tax)
Value of common equity
Pre-IPO number of shares (millions)
Estimated value /share
Price talk
Price as % of value

72,023.8
1,088.9
1,512.0
72,446.9
3,088.5
69,358.4
2,138.1
$
32.44
$
38.00
117%

5,195
2,318
1,391
995
396

7,274
3,167
1,900
1,392
508

0.9002
356

0.8104
412

10,183
4,325
2,595
1,949
646

0.7295
471

WACC
Market values
Weights in WACC
Cost of Component

2015E
4
40.0%
41.4%
40.0%
67%
11.1%

14,256
5,903
3,542
2,729
813

0.6567
534

Equity
81,247.8 $
98.7%
11.2%

2016E
5
40.0%
40.3%
40.0%
67%
11.1%

19,959
8,051
4,830
3,821
1,010

0.5912
597

2017E
6
32.4%
39.3%
39.0%
67%
10.5%

26,425
10,377
6,330
4,333
1,997

0.5352
1,069

Debt
Preferred
1,088.9 $
$
1.3%
0.0%
2.4%
7.1%

2018E
7
24.8%
38.2%
38.0%
67%
9.8%

32,979
12,599
7,811
4,391
3,420

0.4872
1,666

Capital
82,336.7
100.0%
11.1%

2019E
8
17.2%
37.1%
37.0%
67%
9.2%

38,651
14,353
9,042
3,800
5,242

0.4460
2,338

2020E
9
9.6%
36.1%
36.0%
67%
8.6%

42,362
15,279
9,778
2,486
7,292

0.4106
2,995

2021E
10
2.0%
35.0%
35.0%
67%
8.0%

43,209
15,123
9,830
568
9,262

0.3802
3,522

Terminal
year
2.0%
35.0%
35.0%
100%
8.0%

44,073
15,426
10,027
864
9,162
152,707

0.3802
58,064