Assignment 2: The Face Book
Due Week 6, Day 7 (Weight: 16.5%)
The following are specific course learning outcomes associated with this
the qualities of effective corporate governance.
- Use technology and information resources to research issues in advanced
- Write clearly and concisely about advanced financial management using
proper writing mechanics.
- The past two modules have been a bit of a mash-up of different ideas and
tools, which makes it difficult to ask you to perform a neat, simple task that
covers all the material that we covered. Instead, we’re going to ask you to
synthesize the bigger concepts from past lectures. We’re going to do so using a
company that most everyone is familiar with: Facebook.
- Facebook, as everyone pretty much knows now, rocketed to popularity
starting in 2005 and hasn’t looked back since. As you might expect from a
highly successful, capital-intensive, high-tech operation that’s growing at
blazing speeds, the company has gone through several rounds of financing to
finance business growth. We’re going to ask you to look at that financing and
explain to us what happened.
- Though a savvy researcher could find these transactions herself via
Google if she truly wanted to, we’ve gone ahead and pulled the big ones up for
you in chronological order to save you some time. We encourage you to
investigate each of these further, however. There’s no shortage of background
on each of these. Here they are in nice news-bite capsules for digestion:
- The Facebook group announced
that it has raised between $10 million to $12 million in first-round financing
led by Accel Partners on April 15, 2005. As a part of the transaction, Jim
Beyers, a Managing Partner at Accel Partners, joined the company’s board. The
post-money valuation of the company was $100 million.
- Facebook, Inc. announced that
it has raised $27.5 million in its third round of funding led by new investor
Greylock Partners on April 19, 2006. New investor MeriTech Capital Partners and
existing investor Accel Partners invested in the transaction. The post-money
valuation of the company was $525 million.
- Facebook, Inc. announced that
it will raise $240 million in an equity round of funding from new investor
Microsoft Corporation on October 24, 2007. As a result of the transaction,
Microsoft Corporation will now hold 1.60% stake in the company. The round was
raised at a post-money valuation of $15,000 million.
- Facebook, Inc. announced that it has raised $200 million in funding from Digital Sky Technologies Limited on May 26, 2009. Digital Sky Technologies Limited invested in preferred stock and acquired 1.96% stake, valuing the company at $10 billion.
- So what really happened here? What were the major events surrounding and
shaping these investments? We want you to tell us the story of the business as
it unfolded through these massive transactions.
- In order to successfully complete this assignment, you’ll have to rely
on your powers to navigate the world-wide web and your ability to work
backwards a bit. The information is out there if you know how to look. Remember
that until recently, this was a private company, so we can’t easily verify
estimates on these financial numbers. So, be sure to justify your thinking with
plenty of evidence from similar businesses and events. Good luck!
Write a 3-4 page paper in
which you do the following:
- Briefly describe the type of
financing that was being used here and why it was used for each round of
- Speculate as to what the
money was used for after each successive round of financing. (Don’t forget,
Facebook was raising money to finance certain projects.)
- Provide an explanation behind the company’s
bubbly corporate valuation during this time.
- Determine how outside
investors were valuing this company. (Hint: look at similar businesses.)
- Estimate the company’s major
financial numbers (revenue and net income) based on the implied valuation of
the most recent investment.
Your assignment should adhere
to these guidelines:
- Write in a logical, well-organized conventional business style. Use
Times New Roman font size 12 or similar, double-space, and leave ample white
space per page.
- All references must follow JWMI style guide, and works must be cited
appropriately. Check with your professor for any additional instructions on
- On the first page or in a header, include the title of the assignment,
the student’s name, the professor’s name, the course title, and the date. Title
and reference pages are not included in the assignment page length.
- Faculty have discretion to penalize for assignments over or under the assignment guidelines. Check with your individual professor if you feel the assignment requires a much longer or shorter treatment than recommended.
Grading for this assignment
will be based on answer quality, logic/organization of the paper, and language
and writing skills, using the following grading criteria.
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