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TABLE OF CONTENTS Rosetta Stone Financial entrepreneurial initiatives

   

Added on  2020-01-07

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Financial entrepreneurialinitiatives
TABLE OF CONTENTS Rosetta Stone Financial entrepreneurial initiatives_1
TABLE OF CONTENTSRosetta Stone..........................................................................................................................31. Describe the key features of Rosetta Stone's business model and its strategy...................32. Advantage and disadvantage of Rosetta stone undertaking an IPO...................................43. Market-Multiples approach to identify range of prices for an IPO....................................64. Market-Multiple approach and its use for identifying fair value of shares........................75 Reasonable rate of return for Rosetta Stone shares ...........................................................96 Cash flow model and explanation on calculations...........................................................10REFERENCES..............................................................................................................................13ILLUSTRATION INDEXIllustration 1: Average of EV/EBITDA for 2008............................................................................7Illustration 2: Average of EV/EBITDA for 2009...........................................................................8Illustration 3: PE ratio for 2008.......................................................................................................8Illustration 4: PE ratio for 2009.......................................................................................................9Illustration 5: Valuation of shares....................................................................................................9Illustration 6: Required rate of return..............................................................................................9Illustration 7: CAPM Model..........................................................................................................10Illustration 8: Projected income.....................................................................................................11Illustration 9: Calculation of enterprise value................................................................................11Illustration 10: Calculation of WACC...........................................................................................12Illustration 11: Calculation of terminal value................................................................................12Illustration 12: Calculation of equity value...................................................................................12Illustration 13: Calculation of intrinsic value................................................................................12
TABLE OF CONTENTS Rosetta Stone Financial entrepreneurial initiatives_2
Rosetta StoneRosetta Stone is the company that prepare language learning software and it is going tolaunch its IPO in the market. In the report different methods of valuation like market multiple anDCF model are prepared and on the basis of same offer price of firm shares is determined. Inend part of the report, all calculations are attached and explanation on same is given.1. Describe the key features of Rosetta Stone's business model and its strategyRosseta stone's is following the has cloud-based business model and under this modelcompany is providing software's on which one can learn languages. It can be said that firm isproviding language learning solutions. On its software it is using innovative technology and timeto time upgrade its software so the one can learn language in better way. Mentioned firm in orderto expand its business purchase many firms like are Tell Me More and Livemocha etc. studentsand professionals visit firm website to learn languages and it is major source of income for thefirm. These acquisitions helps firm in improving its competitive capability. There are manycorporate clients of the Rosseta stone and it have its own sales personnel who perform CRMfunction for the firm. In order to expand business at rapid pace firm is focusing on developingits core competency (Learn a new language now, 2016). In this regards it is selecting highlyskilled and talented person as employees It drive value by recruiting skilled and highlyexperienced sales force. This is helping firm in making available content on languages in bestway. The one of the best thing that Rosseta stone have in its business is that it is not dependenton single type of customer for earning revenue. Currently, its customer's segment comprisesstudents and professionals, governmental administered offices etc. In terms of product it can besaid that sale of new language and updated learning software's is the the main source of incomeof the firm.Its main strategy is to increase its competitiveness by preparing software in such a waythat give good learning experience to the stakeholders in terms of learning on its software's.In order to implement this strategy firm is making heavy investment in its research anddevelopment projects (Boulton and Campbell, 2016). In this regarding it is upgrading itstechnology base. With passage of time it is making heavy investment in its research anddevelopment projects. On same time it is also focusing on keeping stiff control on itsexpenditures. In this regard, it is maintaining stiff control on material purchase, usage of money
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and R&D projects cost. Firm is following specific strategy under which it is working on projectsthat are different from its current product line. Like it is developing apps that are related to brain.This will enhance customer's base of the firm and will generate new source of income. Hence, itcan be said that firm is focusing on multiple things to increase its business.Porter five forces model of the business firm are as follows.Threat from new entrants- There is less threat from new entrants because in this industryas per past trends very small number of firms enter in some previous years.Bargaining power of buyers- Buyers does not have any bargaining power as they lots ofalternatives are not available to them. Bargaining power of suppliers- Firm have bargaining power because it is givingdifferent and good experience to the people in terms of service quality.Threat from substitutes- Less threat from substitute products because firm is consistentlyupdating its technology base.Threat from rivals- There are few competitors in the industry. However, firm is receivingtough competition from them. But it is capable to compete them. Hence, there is lessthreat from rival firms.Some of the elements like key markets, company growth and innovation underpin theforecast of business growth and development. It can be seen that firm in a sector in which thereare lots of growth opportunities. This means that in future firm business will also grow. Hence, itcan be said that sector in which firm operate is growing then growth rate of same will alsoaccelerate. Innovation is another thing that differentiate firm from its competitors. Rosseta stoneis focusing on innovating its technology base which will lead to easy performance of operationsand reduction in cost. Hence, automatically this form a base of forecast that in future firm growthrate will increase at rapid pace. In this factors like key markets, company growth and innovationsupport the forecast of business growth and development.2. Advantage and disadvantage of Rosseta stone undertaking an IPOIn order to issue IPO there is a regulatory authority from which it is necessary to takepermission. These authorities lay down some rules or parameters and those firms that wants tolaunch there IPO needs to pass these parameters in order to launch IPO. These criteria are
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