[Solved]Describe the key features of Rosetta Stone’s business model and explain its core business strategy

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[Solved]Describe the key features of Rosetta Stone’s business model and explain its core business strategy

Assessment Brief

Using the Case Study Rosetta Stone: Pricing the 2009 IPO, imagine that you have been employed by a Venture Capital fund to assess Rosetta Stone as to its suitability for a public listing of its shares in 2009.

1. Describe the key features of Rosetta Stone’s business model and explain its core business strategy.

10 marks

Student Guidance

In your answers, in addition to the information provided, please apply the concepts from the appropriate areas of financial and economic theory discussed during this and all previous modules during your course. Your answers should include appropriate numerical data and, if appropriate, charts/graphs. You may use any appropriate data from the case study.

2. Critically examine the advantages and disadvantages of Rosetta Stone undertaking an IPO. Your examination should reference the IPO process itself and the legal, financial and other undertakings necessary in “going public”. Do you think the company should list its shares?

20 marks

3. One method of identifying a range of prices for an IPO is the Market-Multiples approach. Critically evaluate this approach as a basis for Rosetta Stone determining an exit value. No calculations are required for this question.

10 marks

4. How could you use the market-multiples approach to arrive at a suitable share price for Rosetta Stone’s IPO? Compute the implicit valuation multiples used. What considerations would need to be made? Show and explain all your workings.

15 marks

5. Based on the case information, what might be a reasonable rate of return on an investment in Rosetta Stone? Explain and show all your workings.

10 marks

6. Apply a Free Cash Flow model to Rosetta Stone to arrive at a valuation. Explain and show all your calculations and workings.

25 marks

7.  What offer price would you set for the IPO? Explain your conclusions.

10 marks

Any results should be analysed and critically evaluated, taking into account a range of possible outcomes. A portion of the marks in the calculation questions are attributable to the analysis accompanying the numbers.

In your answers, in addition to the information provided, please apply the concepts from the appropriate areas of financial and economic theory discussed during this and all previous modules during your course. Your answers should include appropriate numerical data and, if appropriate, charts/graphs