MGT 189辅导、Python，Java编程辅导
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MGT 189 – Business Finance
Airbnb (ticker: ABNB) was a high-profile initial public offering (IPO) in January 2021 and has been in the
news ever since. The purpose of this case is to apply your capital budgeting skills in a valuation of Airbnb.
Think of valuing a company like a big capital budgeting exercise. However, instead of forecasting cash
flows for a single project, you will be forecasting cash flows for an entire company. Likewise, instead of
computing the NPV of an individual project, you will compute the NPV of the cash flows of the entire
company. There will be one key difference: with projects we typically assume they come to an end, but
with companies we don’t (at least we hope not!). Thus, we need to make an assumption about how cash
flows in the company grow in the long run. Typically we forecast individual cash flows for 5-10 years and
then make an assumption about how cash flows grow after that (more details on this below). Here are
the steps for the Airbnb case:
1. Start with the Airbnb excel worksheet I’ve posted on Canvas (Airbnb.xlsx)
2. The spreadsheet gives assumptions about the year-over-year (YOY) growth of revenues and
related expenses for 2022-2030. These assumptions come from analyst reports and Airbnb management
forecasts. Combining these sources gives a bumpy growth forecast for the next few years which is why
the YOY growth estimates do not follow a smooth pattern at first. Use the base case assumptions in the
excel sheet to build a forecast of earnings and free cash flows for the years 2022 to 2030. Specifically, start
by forecasting revenues each year. Then, using these forecasts, compute the associated “cost of
revenue”, depreciation and capital expenditures. Cost of revenue are all costs of revenue not including
depreciation, so that Revenue – Cost of Revenue = Earnings Before Interest Taxes Depreciation and
Amortization (EBITDA). Subtract off depreciation to get EBIT. Continue as we did in our capital budgeting
exercises until you eventually get to Free Cash Flow. You can assume a tax rate of 21% and negligible
changes in net working capital. You can also assume an opportunity cost of capital of 9% for all the FCFs.
3. Beyond 2030, you will need to make an assumption about Airbnb’s long-term growth once it
becomes a mature company.
? Start with the free cash flows you forecast for 2030 and assume that they will grow by 3% to 2031
and continue growing at 3% thereafter. You can then use the growing perpetuity formula to value
all the cash flows after 2030. By doing this, you will have what is called a “terminal value” or
“continuation value” for Airbnb as of the end of 2030 (one year before the first cash flow in the
growing perpetuity).
4. To avoid timing complexities, we will assume that it is now the beginning of 2022 and that the
first cash flow (the 2022 FCF) will be generated exactly one-year from now, at the end of 2022. Discount
all cash flows back to the beginning of 2022 using a 9% cost of capital. The sum of total of these discounted
cash flows is the estimated total enterprise value of Airbnb at the beginning of 2022. Enterprise Value =
Equity + Debt – (Cash and Marketable Securities).
5. To arrive at the price per (equity) share, you must subtract Airbnb’s debt from its enterprise value
and then add Airbnb’s cash and marketable securities.
Airbnb Case| MGT 189 | Winter 2022 Page 2 of 2
? Airbnb has $2.0 billion in debt and $8.6 billion in cash and marketable securities.
? Airbnb has 616 million shares outstanding. Use this information to calculate the price per share.
6. Next, perform some sensitivity analysis.
? Use the Upside and Downside scenarios to compute Upside and Downside stock prices.
? Using the base case, check the sensitivity of the valuation to the assumptions about Airbnb’s cost
of revenue. The sheet assumes that Airbnb will be able to stabilize its cost of revenue to be 71%
in 2030. However, competition, higher product support expenses, or increased advertising could
eat into this. Calculate Airbnb’s stock price if Cost of Revenue evolves as in the “Sensitivity CoR”
row in the spreadsheet.
7. As of the writing of this case, Airbnb’s stock price was $155.
? Consider what it would take for your forecast to produce a valuation that equates to a
$155 stock price.
? By changing your revenue growth assumptions, find a set of YoY growth assumptions that would
produce a stock price of approximately $155.
? With these revenue assumptions in place, compute the compound annual growth rate (CAGR) in
FCF from 2022 to 2030. For example, if your estimate of 2022 FCF is $1,000 and for 2030 is
$10,000, then you would use the “RATE” function in Excel: =RATE(8,0,-1000,10000).
8. An alternative way to value a stock is by use of multiples. NOTE: There is no reason to expect the
multiples-based valuation to agree with your discounted cash flow (DCF) valuation. This may be true for
a couple of reasons: 1) It is difficult to find a reasonable comparison company, and 2) Airbnb may
command a premium valuation (which may be justified or not).
? Start by valuing Airbnb based on your 2022 projected EBITDA and using the hotel industry average
Enterprise Value/EBITDA ratio of 27.8. This will give you a total company value which you would
replace your NPV of FCF in your share value calculation (you still need to subtract debt and add
cash and marketable securities before dividing by shares outstanding to get the price per share).
? Do the same with the average EV/EBITDA ratio for Internet-based companies: 23.0.
Overall, what is your estimate of what Airbnb’s stock price should be and what range of valuations do you
think are reasonable? Defend your conclusion by discussing and referencing the outcomes of the
valuations in steps 5 to 8. You will have arrived at a range of prices and you will need to take a stand on
how to interpret this range and which prices and assumptions to weigh more heavily. Your answer should
take the form of a memo (maximum 2 single-spaced pages) that references spreadsheet exhibits (the
exhibits do not count toward the 2-page limit). Do NOT write a chronological history of what you did to
solve this case and do NOT write it as #5) answer, #6) answer, etc. You are supposed to explain the
highlights of your approach, synthesize what you found, draw a conclusion, and defend it.
This is a group case with a maximum number of five people per group. Submission is electronic via Canvas
with one submission per group. Submissions MUST also include your Excel file ending in .xlsx. Please
make sure your Excel file is not corrupted before submitting, and please list the name of each group
member in your submission.
MGT 189 – Business Finance
Airbnb (ticker: ABNB) was a high-profile initial public offering (IPO) in January 2021 and has been in the
news ever since. The purpose of this case is to apply your capital budgeting skills in a valuation of Airbnb.
Think of valuing a company like a big capital budgeting exercise. However, instead of forecasting cash
flows for a single project, you will be forecasting cash flows for an entire company. Likewise, instead of
computing the NPV of an individual project, you will compute the NPV of the cash flows of the entire
company. There will be one key difference: with projects we typically assume they come to an end, but
with companies we don’t (at least we hope not!). Thus, we need to make an assumption about how cash
flows in the company grow in the long run. Typically we forecast individual cash flows for 5-10 years and
then make an assumption about how cash flows grow after that (more details on this below). Here are
the steps for the Airbnb case:
1. Start with the Airbnb excel worksheet I’ve posted on Canvas (Airbnb.xlsx)
2. The spreadsheet gives assumptions about the year-over-year (YOY) growth of revenues and
related expenses for 2022-2030. These assumptions come from analyst reports and Airbnb management
forecasts. Combining these sources gives a bumpy growth forecast for the next few years which is why
the YOY growth estimates do not follow a smooth pattern at first. Use the base case assumptions in the
excel sheet to build a forecast of earnings and free cash flows for the years 2022 to 2030. Specifically, start
by forecasting revenues each year. Then, using these forecasts, compute the associated “cost of
revenue”, depreciation and capital expenditures. Cost of revenue are all costs of revenue not including
depreciation, so that Revenue – Cost of Revenue = Earnings Before Interest Taxes Depreciation and
Amortization (EBITDA). Subtract off depreciation to get EBIT. Continue as we did in our capital budgeting
exercises until you eventually get to Free Cash Flow. You can assume a tax rate of 21% and negligible
changes in net working capital. You can also assume an opportunity cost of capital of 9% for all the FCFs.
3. Beyond 2030, you will need to make an assumption about Airbnb’s long-term growth once it
becomes a mature company.
? Start with the free cash flows you forecast for 2030 and assume that they will grow by 3% to 2031
and continue growing at 3% thereafter. You can then use the growing perpetuity formula to value
all the cash flows after 2030. By doing this, you will have what is called a “terminal value” or
“continuation value” for Airbnb as of the end of 2030 (one year before the first cash flow in the
growing perpetuity).
4. To avoid timing complexities, we will assume that it is now the beginning of 2022 and that the
first cash flow (the 2022 FCF) will be generated exactly one-year from now, at the end of 2022. Discount
all cash flows back to the beginning of 2022 using a 9% cost of capital. The sum of total of these discounted
cash flows is the estimated total enterprise value of Airbnb at the beginning of 2022. Enterprise Value =
Equity + Debt – (Cash and Marketable Securities).
5. To arrive at the price per (equity) share, you must subtract Airbnb’s debt from its enterprise value
and then add Airbnb’s cash and marketable securities.
Airbnb Case| MGT 189 | Winter 2022 Page 2 of 2
? Airbnb has $2.0 billion in debt and $8.6 billion in cash and marketable securities.
? Airbnb has 616 million shares outstanding. Use this information to calculate the price per share.
6. Next, perform some sensitivity analysis.
? Use the Upside and Downside scenarios to compute Upside and Downside stock prices.
? Using the base case, check the sensitivity of the valuation to the assumptions about Airbnb’s cost
of revenue. The sheet assumes that Airbnb will be able to stabilize its cost of revenue to be 71%
in 2030. However, competition, higher product support expenses, or increased advertising could
eat into this. Calculate Airbnb’s stock price if Cost of Revenue evolves as in the “Sensitivity CoR”
row in the spreadsheet.
7. As of the writing of this case, Airbnb’s stock price was $155.
? Consider what it would take for your forecast to produce a valuation that equates to a
$155 stock price.
? By changing your revenue growth assumptions, find a set of YoY growth assumptions that would
produce a stock price of approximately $155.
? With these revenue assumptions in place, compute the compound annual growth rate (CAGR) in
FCF from 2022 to 2030. For example, if your estimate of 2022 FCF is $1,000 and for 2030 is
$10,000, then you would use the “RATE” function in Excel: =RATE(8,0,-1000,10000).
8. An alternative way to value a stock is by use of multiples. NOTE: There is no reason to expect the
multiples-based valuation to agree with your discounted cash flow (DCF) valuation. This may be true for
a couple of reasons: 1) It is difficult to find a reasonable comparison company, and 2) Airbnb may
command a premium valuation (which may be justified or not).
? Start by valuing Airbnb based on your 2022 projected EBITDA and using the hotel industry average
Enterprise Value/EBITDA ratio of 27.8. This will give you a total company value which you would
replace your NPV of FCF in your share value calculation (you still need to subtract debt and add
cash and marketable securities before dividing by shares outstanding to get the price per share).
? Do the same with the average EV/EBITDA ratio for Internet-based companies: 23.0.
Overall, what is your estimate of what Airbnb’s stock price should be and what range of valuations do you
think are reasonable? Defend your conclusion by discussing and referencing the outcomes of the
valuations in steps 5 to 8. You will have arrived at a range of prices and you will need to take a stand on
how to interpret this range and which prices and assumptions to weigh more heavily. Your answer should
take the form of a memo (maximum 2 single-spaced pages) that references spreadsheet exhibits (the
exhibits do not count toward the 2-page limit). Do NOT write a chronological history of what you did to
solve this case and do NOT write it as #5) answer, #6) answer, etc. You are supposed to explain the
highlights of your approach, synthesize what you found, draw a conclusion, and defend it.
This is a group case with a maximum number of five people per group. Submission is electronic via Canvas
with one submission per group. Submissions MUST also include your Excel file ending in .xlsx. Please
make sure your Excel file is not corrupted before submitting, and please list the name of each group
member in your submission.