3. Facebook launched its initial public offering (IPO) on May 18, 2012. Suppose you were considering whether to buy some Facebook stock on that day.
a. Comparable companies include Zynga, Yelp, and Groupon. Look up their P/E ratios on Yahoo Finance or Google Finance. What’s the problem with using comparable P/E ratios to evaluate companies in this industry?
b. Look up Facebook’s dividend per share on Yahoo Finance or Google Finance. What should be its price according to the Gordon model?
c. What are some difficulties associated with using a multistage dividend growth model to evaluate the value of Facebook stock?
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