1. What alternative valuation methods could Google have used to justify the purchase price it paid for YouTube? Discuss the advantages and disadvantages of each.
2. The purchase price paid for YouTube represented more than 1% of Google’s then market value. If you were a Google shareholder at that time, how might you have evaluated the wisdom of the acquisition?
3. To what extent might the use of stock by Google have influenced the amount it was willing to pay for YouTube? How might the use of “overvalued” shares impact future appreciation of the stock?
4. What is the appropriate cost of equity for discounting future cash flows? Should it be Google’s or YouTube’s? Explain your answer.
5. What are the critical valuation assumptions implicit in the valuation method discussed in this case study? Be specific.

$410 million, about.com is a website offering consumer information and advice and is believed to be one of the biggest and most profitable websites on the Internet, with estimated 2006 revenues of almost $100 million. With a monthly average number of unique visitors worldwide of 42.6 million, about.com’s revenue per unique visitor was estimated to be about $0.15, based on monthly revenues of $6.4 million.