valuing google IPO share price

please finish this work in 5 hours. There is also excel sheet.

"Valuing google IPO share price."

Google inc. of Mountain view, California, operates the most popular and powerful search engine on the Web. The company went public using an unconventional Dutch auction method on August 19,2004. The resulting IPO was the largest internet IPO ever, raising $[url removed, login to view] billion and leaving the firm with 271,219,643 shares of common stock.

While Google commands a wide lead over its competitors in the search engine market, it is witnessing an increased pressure from well funded rival entities. Yahoo! inc., with a market cap of approximately $[url removed, login to view], is generally regarded as following a business model very similar to Google's.

a. Using the method of multiples based on both the P/E ratio and the enterprise value to EBITDA ratio, at what price should the stock be offered? Use the data found in Exhibit p8-10.1 for the following companies as comparable in your analysis; Earthlink, Yahoo,eBay,and Microsoft. Compute the IPO value for google's shares using each of the comparable firms separately, and then use an average "multiple" of the comparable firms. Use the year-end 2003 balance sheets and income statements of the comparable firms to do the analysis. Assume that Google's forecasted values at the time of the IPO are as follows: Net income is $400 million,EBITDA is approximately $800 million, cash and equivalents are $430 million and interest-bearing debt(Total short-term and long-term ) equals only $10 million.

b. which of the four comparable firms do you think is the best comparison firm for Google? Why?

c. How has the stock performed because the IPO? Do you believe that Google is currently correctly valued in the stock market? Why or Why not?

Skills: Accounting, Finance

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