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Generally Accepted Accounting Principles Essay Topics & Paper Examples

Linked in Case

When attempting to determine the valuation of LinkedIn it helps to understand some of the issues involved. The most accurate way to value a stock‚Äôs price is using discounted cash flows. The problem with this approach is that it is nearly impossible to predict with any accuracy what the long-term cash flows are for a given company; especially a company that is young or that might be using an innovative and new business model. Additionally, knowing what long-term cash flows look like requires knowledge of the long-term growth rate, operating margin, weighted average cost of capital, discount rate and reinvestment rate. This makes using discounted cash flows especially difficult young companies. The discounted cash flow, in Exhibit #1 below, shows…