Question
Use Alibaba Group's consolidated financial statements (pp. F-3 - F-6) to approximate the company's equity value as implied by its IPO. Based on an IPO value of USD 25 billion and a floating of 14.8% of its ordinary shares, the company's equity value is USD 169 billion.
For your calculations, use a one-period discounted cash flows model based on the financial statement information for the year ended March 31, 2014.
That is, treat the 2014 free cash flows to equity as perpetuity with growth. Cost of equity are 14.5%. Given the company's expansion of business assets, you will obtain negative free cash flows based on the net income for the year ended March 31, 2014.
As an alternative, use the net income for the three months ended June 30, 2014 (p. F-79) and extrapolate this figure for the full year.
Discuss the growth rate implied by your calculations.