Why is terminal value important to obtain in a discounted

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Question 1: suppose instead of using K-12 Inc. as the comparable company for the Mutiples valuation, Roselta Stone (Case 47) had used the 2008 value of EV/EBITDA for DeVry Inc. =12.5 ( Exhibit 10).

Using the Exhibit 7 (historical financial performance of Rosetta Stone in 2008) and using the total shares prior to offering (Exhibit 9), what would be estimated price per share for Rosetta Stone at 1PO? Based on your estimate, would the Rosetta Stone IPO price in 2009 be underpriced or overpriced?

Question 2: If the Rosseta Stone IPO was underpriced in 2009, mention one major cost and one major benefit of underpricing the IPO.

Question 3: Why is terminal value important to obtain in a Discounted Cash Flow (DCF) analysis?

Reference no: EM133325667

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