On Wednesday 8th of February 2023, the share price of Alphabet (the parent company of Google) fell nearly 8%to below $100 per share, erasing more than 100 billion dollar in market value. The reason (s) for the drop in share price can be attributed to the popularity of the ChatGPT bot.

a) Since Alphabet is an established company, if you have to value the company’s share using a discounted cash flow technique, would you use the annuity or perpetuity formula?
b) Based on the formula you choose in part a, what do you think is the impact that ChatGPT have on each of the component of your valuation? Explain in dot points

Answer rating: 100% (QA)

a When valuing an established company like Alphabet using the discounted cash flow technique it is a... View the full answer