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Dr. KOOP Valuation . Professor Joshua Livnat, Ph.D., CPA 311 Tisch Hall New York University 40 W. 4th St. NY NY 10012 Tel. (212) 998-0022 Fax (212) 995-4230 [email protected] Web page: www.stern.nyu.edu/~jlivnat. Valuation Approaches. E-Tailers: Project the entire market potential

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Dr koop valuation l.jpg

Dr. KOOP Valuation

Professor Joshua Livnat, Ph.D., CPA

311 Tisch Hall

New York University

40 W. 4th St.

NY NY 10012

Tel. (212) 998-0022 Fax (212) 995-4230

[email protected]

Web page: www.stern.nyu.edu/~jlivnat


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Valuation Approaches

  • E-Tailers:

    • Project the entire market potential

      • Use current market size

      • Assess growth of the market due to online purchasing

    • Estimate market share

    • Using predicted profitability, forecast future cash flows

    • Discount to present


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Valuation Approaches

  • Reverse auction and market making:

    • Typically, transaction-based fees

    • Assess market size

      • Use historical growth rates

      • Conform to overall market potential

    • Predict fees based upon market size

    • Using estimated profitability, assess future cash flows

    • Discount to present


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Valuation Approaches

  • Entertainment/Content:

    • Determine revenue sources

      • Advertising

      • Referral fees

      • Pay per use

    • Predict growth in visitors/members

    • Predict growth in revenues

    • Predict future expenses and cash flows

    • Discount cash flows






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Steady - State Operational Model

  • Revenues

    • We use the regression result $1.6 MM (quarterly) per 1 million visitors.

  • Content expenses

    • Regression results make sense. We use fixed ($1MM) and variable ($1.4MM per 1MM visitors) components.

  • General & Administrative expenses

    • Regression results make sense. We use fixed ($0.54 MM) and variable ($1.39MM per 1MM visitors) components.

  • Selling & Marketing

    • We use variable costs of $2.2 MM (quarterly) per 1MM visitors plus fixed costs of $1.1 MM.


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Operational Model

3MM/quarter.

Revenues are determinedas Square(Reach)*$1.58MM



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Value !!!

  • Assumptions:

  • Financing can be obtained in 2000-2003.

  • Number of shares remain the same.



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Summary

  • Advertising revenue model will not be long-term viable unless the company can sign up partnership – unlikely given the lower traffic.

  • Probability for significant E-Commerce is low.

  • Expenses are too high.

  • Volume analysis at current levels indicates failure.

  • Cash flow shortages in the next 4 years.

  • Low price per share even if company survives and generates positive cash flows.


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