For the final group

MGMT 648: APPLIED FINANCE
VALUATION PROJECT
For the final group project, you will perform a valuation of Facebook (FB) and explore how
markets updated about Facebook in the summer of 2018.
Financial statements and returns data for Facebook are posted on Canvas. For this valuation,
please make marketable securities or cash the plug in your pro-forma analysis. Please clearly
state the assumptions you are making concerning cost of capital, growth rates, financial ratios,
etc. Why did you choose them?
You should produce a price per share for Facebook. The price for Facebook as of Dec. 29, 2017
was $176. Based on your model, would Facebook have been a BUY or a SELL at that price?
You may make a conditional recommendation (for example, BUY if the stock hits $X/share
etc.). The decision to short sell the stock is also a possible recommendation.
On July 25, 2018, Facebook closed at $217.50 per share. The next day it closed down almost
20% at $176.26, erasing about $120 billion in market capitalization. Using your model,
approximately what change in the sales growth rate over the next few years would justify the
sharp drop in stock price seen in July 2018?
Please turn in a soft-copy PDF containing a summary of your valuation that answers the
questions above (2-4 pages text) plus additional exhibits. The exhibits should include the inputs
to your model, pro-forma financials, the DCF model, and cost of capital calculations along with
any other analyses you deem important. Please submit your soft-copy PDF as well as your
valuation spreadsheet to Canvas. Only one submission per team is required.
Good Luck!
Some Notes:
 Facebook projects that amortization expense will be $633, 540, 365, 265, and 29 million
over the years 2018, 2019, 2020, 2021, and 2022. These expenses reduce Intangible
Assets on the balance sheet.
 You may assume that Goodwill and Debt remain at their current values.
 The aim of this project is to build your own valuation model. You are not permitted to use
ready-made valuation models (for example, those available in the Finance Center).