a$.$ A Morgan Stanley analyst produced the financial forecasts provided in the Snap Supplemental Workbook shortly after the offering. The analyst assumed a WACC of $9\mathrm{.}7\%$ and $1,404$ shares outstanding. Under these assumptions, what would be the discounted cash flow $($DCF$)$ estimate of Snap stock$$s fair market value on a per share basis?

i$.$ How sensitive is this estimate of Snap$$s stock price to assumptions about growth and WACC?

ii$.$ Do these assumptions and forecasts appear reasonable? What data would you use to asses that?

iii. Analyze Snap$$s DCF value under various alternative assumptions of your own.

$$ What important changes would you make to the forecasts provided in the Snap Supplemental Workbook, if any?

$$ What discount rate would you recommend using in this DCF analysis? Assume a longterm government bond rate of $3\mathrm{.}16\%.$

$$ How, in particular, would you deal with the uncertainty associated with Snap$$s future growth?

b$.$ Do you believe that Snap underpriced its IPO? If so$,$ why might it have sone, and would you agree with that decision? If you were the CEO of a company undergoing an IPO, would you agree to underprice it at the time of the offering?DCF Valuation Assumptions

WACC

Perpetual Growth Rate

$9\mathrm{.}7\%$

$3\mathrm{.}50\%$