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Yahoo company valuation- Jan 2012

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The purpose of this report is to explain to the audience, the recommendation regarding buying, holding or selling the shares of Yahoo Inc., which is listed at NASDAQ as YHOO. On the basis of the detailed valuation of the company and the thorough analysis, we strongly recommend...

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  • pg 1
									Yahoo Inc.
Company valuation


  -Vikash   Ranjan
Table of Contents
Executive Summary ................................................................................................................................................................................... 3
Introduction ............................................................................................................................................................................................... 3
Company information ............................................................................................................................................................................... 3
    About the company and recent developments within ........................................................................................................................... 3
        Competitors and the market ............................................................................................................................................................ 3
Main report ............................................................................................................................................................................................... 4
    Part A: Discounted cash flow method .................................................................................................................................................... 4
              WACC calculations ...................................................................................................................................................................... 4

             Future cash flows and present value ........................................................................................................................................... 5

             Equity value and expected share price ........................................................................................................................................ 5

    Part B: P/E multiples method ................................................................................................................................................................. 5
    Part C: Asset based method ................................................................................................................................................................... 6
Sensitivity Analysis .................................................................................................................................................................................... 6
Recommendation and conclusion ............................................................................................................................................................. 6
References and bibliography .................................................................................................................................................................... 7
Appendices ................................................................................................................................................................................................ 8
        Appendix 1a                      Yahoo and its competitors ’share prices ......................................................................................................... 8
         Appendix 1b                      Internet Search market share ....................................................................................................................... 8
        Appendix 1c                      Yahoo and competitors key ratios ................................................................................................................ 8

        Appendix 2a                      Internet growth .............................................................................................................................................. 9
        Appendix 2b                      Internet search marketing growth ................................................................................................................. 9
        Appendix 3                       Discounted Cash Flow calculations .............................................................................................................. 10
        Appendix 4a                      Cost of debt .................................................................................................................................................. 11
        Appendix 4b                      Cost of equity ............................................................................................................................................... 11
        Appendix 4c                      Beta calculation for Yahoo ........................................................................................................................... 11
        Appendix 4d                      Capital structure (debt/equity) and WACC ................................................................................................. 12
       Appendix 5a                       Equity value calculations .............................................................................................................................. 13

        Appendix 5b                      PV of Equity and share price based on different WACCs ............................................................................. 13
        Appendix 6                       P/E multiples calculations ............................................................................................................................ 14
        Appendix 7                       Asset based method calculations ................................................................................................................. 14
        Appendix 8                       Sensitivity Analysis ....................................................................................................................................... 15
        Appendix 9                       Depreciation and Amortization expenses data fragment ............................................................................ 17
        Appendix 10                      Capital Expenditure expenses data fragment .............................................................................................. 18
        Appendix 11                      Capex projections data fragment ................................................................................................................. 18
        Appendix 12                       Working Capital data fragment .................................................................................................................... 18


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Executive summary
The purpose of this report is to explain to the audience, the recommendation regarding buying, holding or selling the
shares of Yahoo Inc., which is listed at NASDAQ as YHOO. On the basis of the detailed valuation of the company and the
thorough analysis, we strongly recommend holding the shares.


Introduction
The report contains the valuation of Yahoo Inc., based on its current and past financial statements, and the Annual
reports1. An analysis based on the current market position of Yahoo, the current buzz in the market about the various
potential business options, its competitors, the industry trends and the overall equity market scenario, are some of the
compelling rationale behind the recommendations of this report.

The following company valuation techniques (detailed calculations sheet) have been used2 to avoid any discrepancies,
and add more credence to the findings:

     Discounted cash flow (DCF)
     P/E multiples
     Asset based
The Dividend growt
								
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