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Dr. KOOP Valuation

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 jlivnat@stern.nyu.edu Web page: www.stern.nyu.edu/~jlivnat. Valuation Approaches. E-Tailers: Project the entire market potential

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Dr. KOOP Valuation

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

  2. 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

  3. 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

  4. 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

  5. Regression of Revenues on Visitors

  6. Regression of Content on Visitors

  7. Regression of G&A on Reach

  8. Regression Sell&Marktg on Reach

  9. 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.

  10. Operational Model 3MM/quarter. Revenues are determinedas Square(Reach)*$1.58MM

  11. Prediction Model

  12. Value !!! • Assumptions: • Financing can be obtained in 2000-2003. • Number of shares remain the same.

  13. Qualified Audit Opinion New Financing

  14. 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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