Sample Finance (FIN 461) Paper on Rosetta Stone Valuation Exercise-Get a Similar Paper Written from Scratch
Rosetta Stone Valuation Exercise
In the Comparable Companies Analysis, I grabbed the relative companies that are similar to Rosetta Stone from the list of relative companies, then, I delete the companies that with uncompleted value or with extreme value, for example, a company that has absence of the P/E ratio or a company that has a very high enterprice value relative to the rest of the companies. By averaging the P/E and EV/EBITDA ratio, I finally run Rosetta Stone’s implied share price at $20.36 and Enterprice Value at $443.14 million.
From the DCF Analysis, I projected ten-year value the items on the income statements of Rosetta Stone to project it’s EBIT till 2018, then I used another spread sheet find the value of Depreciation & Amortization to help with calculating the Free Cash Flow (FCF), then discounted the FCF back to find the implied share price and enterprice value. Through the DCF Analysis, I finally run the implied share price at $12.70 and Enterprice Value at $691 million.
It is challenging Rosetta Stone to go public in April 2009. In my opinion, the financial crisis in 2008 could impact the IPO of Rosetta Stone. It is widely acknowledged that financial crisis could lead the stock price of the whole market to drop, so Rosetta Stone go public at this time, it’s stock price could be lower than the expected stock price value from those financial analysis. Moreover, it takes time to IPO, in 2009, there are a lot of companies go public, the process may need more time and the regulation may become more restrict.
Sometimes it is hard for a company’s manager to choose IPO or outright sale of its company, in this way, the manager needs to consider the benefits and drawbacks of the decision. If a manager chooses to IPO, some benefits could be gotten. To begin with, IPO could help to increase the company’s awareness among the world, thus the company will have greater chance to get resources and investments, it is a good way for companies to expand. Furthermore, IPO could help a company to improve its capital structure, then the company could have better hedge to risks. In addition, since the company is going public and well-know, the company could have greater chance to have more professional employees.
However, IPO also have its drawbacks compared with outright sales. First, IPO needs the company’s financial and business information to be transparent, as it exposes to the world transparently, the manager would have new responsibility in managing the company because every step of the company is being watched from a lot of people. In addition, IPO could lead an increase of a company’s expense. Besides, the company should undertake the risk if the raise of capital cannot complete.
