Exhibit 10: Morgan Stanley's Cash Flow Forecasts and Valuation Assumptions for Snap Inc. ($ millions) Item...

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Exhibit 10: Morgan Stanley's Cash Flow Forecasts and Valuation Assumptions for Snap Inc. ($ millions) Item Income Statement Net Revenue Growth Adj. EBITDA (Note 1) Adj. EBITDA Margin Cash Flow Items Cash Taxes Incr (Decr) in Net WC Capital Expenditures Stock-based Comp. Free Cash Flow Tax Rate Cost of Equity 2016Act Equity Risk Premium Stated WACC $405 589.5% ($459) (113.6%) $0 Morgan Stanley Valuation Assumptions Cost of Debt Future Leverage (D/V) $151 $67 $0 $257 $83 $32 $75 ($709) ($1,186) 2017 3.00% 2% 35% 9.90% 5.59% 9.7% 2018 $944 $1,935 $3,254 133.3% 105.0% 68.2% ($195) (6.0%) ($772) ($610) (81.8%) (31.5%) 2019 $0 $0 $228 $231 $97 $109 $159 $203 ($1,093) ($737) Financial Forecast ($ millions) 2020 $4,902 $6,907 50.6% $363 7.4% $0 $228 $120 $257 ($243) 2021 # Fully Diluted Shares (millions) Excess Cash ($ mil) Perpetual Growth Rate $0 $209 $130 $317 $818 $9,189 $11,635 $14,131 $16,569 40.9% 33.0% 26.6% 21.4% 17.3% $1,474 $2,616 $3,888 $5,223 $6,574 21.3% 28.5% 37.0% 39.7% 33.4% 1,404 $2,081 2022 3.5% 2023 2024 $0 $823 $224 $207 $140 $155 $421 $533 $648 $1,831 $2,958 $3,390 $0 $248 $148 2025 Source: Nowak, B., et al., "Crackle or Pop? Initiate OW, $28 PT," Snap Inc. analyst report Exhibit 5 (p. 7), Morgan Stanley Research, 3/27/17. Note 1: Adjusted EBITDA is a non-GAAP item. It excludes stock-based compensation expense (a cash expense), but includes depreciation and amortization. $1,448 $151 $161 $759 $4,054 Market Data (March 27, 2017) US Treasury Yields 30-Year 10-Year 27-Mar 3.06% 2.38% Note 2: Morgan Stanley Equity Research Disclosure: Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. (p. 1 of the Snap Inc. analyst report, 3/27/17). Note 3: Morgan Stanley Code of Conduct: Our values inform everything we do: Putting Clients First, Leading with Exceptional Ideas, Doing the Right Thing and Giving Back. Our Code of Conduct reflects our continued commitment to performing all our business activities in accordance with these core values and in full alignment with the letter and spritit of applicable laws, regulations and our policies... Putting Clients First requires us to place our clients' interests first and avoid conflicts between their interests and ours. Available at https://www.morganstanley.com/about-us-governance/code-of-conduct, accessed 3/18/18. Year 2026 Used Only to Calculate TV $17,149 3.5% $6,804 39.7% $4,196 c. The free cash flow forecast in general and Snap's 2020 revenue forecast in particular. (15 points) What growth rates does the FCF forecast assume for revenue? (Hint: not terminal value but the first years of FCF) - - Discuss how Nowak's report argues that Snap will accomplish this growth. - In your opinion, is this growth rate reasonable? Discuss why. - How does the revenue forecast compare against what other analysts have predicted? - Did the analysts with more optimistic FCF forecasts use higher or lower discount rates? (Show a table as well as discuss) - Does this explain why the price target estimates by the different analysts was fairly close even though they had very different FCF forecasts? Explain. Exhibit 10: Morgan Stanley's Cash Flow Forecasts and Valuation Assumptions for Snap Inc. ($ millions) Item Income Statement Net Revenue Growth Adj. EBITDA (Note 1) Adj. EBITDA Margin Cash Flow Items Cash Taxes Incr (Decr) in Net WC Capital Expenditures Stock-based Comp. Free Cash Flow Tax Rate Cost of Equity 2016Act Equity Risk Premium Stated WACC $405 589.5% ($459) (113.6%) $0 Morgan Stanley Valuation Assumptions Cost of Debt Future Leverage (D/V) $151 $67 $0 $257 $83 $32 $75 ($709) ($1,186) 2017 3.00% 2% 35% 9.90% 5.59% 9.7% 2018 $944 $1,935 $3,254 133.3% 105.0% 68.2% ($195) (6.0%) ($772) ($610) (81.8%) (31.5%) 2019 $0 $0 $228 $231 $97 $109 $159 $203 ($1,093) ($737) Financial Forecast ($ millions) 2020 $4,902 $6,907 50.6% $363 7.4% $0 $228 $120 $257 ($243) 2021 # Fully Diluted Shares (millions) Excess Cash ($ mil) Perpetual Growth Rate $0 $209 $130 $317 $818 $9,189 $11,635 $14,131 $16,569 40.9% 33.0% 26.6% 21.4% 17.3% $1,474 $2,616 $3,888 $5,223 $6,574 21.3% 28.5% 37.0% 39.7% 33.4% 1,404 $2,081 2022 3.5% 2023 2024 $0 $823 $224 $207 $140 $155 $421 $533 $648 $1,831 $2,958 $3,390 $0 $248 $148 2025 Source: Nowak, B., et al., "Crackle or Pop? Initiate OW, $28 PT," Snap Inc. analyst report Exhibit 5 (p. 7), Morgan Stanley Research, 3/27/17. Note 1: Adjusted EBITDA is a non-GAAP item. It excludes stock-based compensation expense (a cash expense), but includes depreciation and amortization. $1,448 $151 $161 $759 $4,054 Market Data (March 27, 2017) US Treasury Yields 30-Year 10-Year 27-Mar 3.06% 2.38% Note 2: Morgan Stanley Equity Research Disclosure: Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. (p. 1 of the Snap Inc. analyst report, 3/27/17). Note 3: Morgan Stanley Code of Conduct: Our values inform everything we do: Putting Clients First, Leading with Exceptional Ideas, Doing the Right Thing and Giving Back. Our Code of Conduct reflects our continued commitment to performing all our business activities in accordance with these core values and in full alignment with the letter and spritit of applicable laws, regulations and our policies... Putting Clients First requires us to place our clients' interests first and avoid conflicts between their interests and ours. Available at https://www.morganstanley.com/about-us-governance/code-of-conduct, accessed 3/18/18. Year 2026 Used Only to Calculate TV $17,149 3.5% $6,804 39.7% $4,196 c. The free cash flow forecast in general and Snap's 2020 revenue forecast in particular. (15 points) What growth rates does the FCF forecast assume for revenue? (Hint: not terminal value but the first years of FCF) - - Discuss how Nowak's report argues that Snap will accomplish this growth. - In your opinion, is this growth rate reasonable? Discuss why. - How does the revenue forecast compare against what other analysts have predicted? - Did the analysts with more optimistic FCF forecasts use higher or lower discount rates? (Show a table as well as discuss) - Does this explain why the price target estimates by the different analysts was fairly close even though they had very different FCF forecasts? Explain.

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Free Cash Flow FCF Forecast and Snaps 2020 Revenue Forecast Growth Rates in FCF Forecast for Revenue The FCF forecast assumes varying growth rates for ... View the full answer