01 - Corporate Strategy and Valuation

01 - Corporate Strategy and Valuation - Venture Capital and...

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Venture Capital and the Finance of Innovation Corporate Strategy & Value Creation orporate Strategy & Value Creation Co po a e S a egy & Va ue C ea o Professor David Wessels ©2008 The Wharton School of the University of Pennsylvania 3620 Locust Walk, Philadelphia PA 19104
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Venture Capital and the Finance of Innovation Corporate Strategy & Value Creation iO i Session Overview Traditional rules of thumb about valuation can be misleading , and in some cases harmful. We start the course by disavowing three rules of thumb. Lesson 1 : Value is driven by growth, but not all growth is created equal …......... …….…3 Lesson 2 : EBITDA & Earnings Per Share (EPS) often fail to measure value ….………. ....8 The value of a company can be traced to four key value drivers , core operating rofit, return on capital, cost of capital, and organic revenue growth ……. .17 profit, return on capital, cost of capital, and organic revenue growth………. During the course, we will evaluate Network Appliances , a fast growing storage device maker. Today, the company earns strong returns on capital and is growing quickly, but will the company’s core technology win over competing technologies? ……………………………………….………. .…. .26 Professor David Wessels The Wharton School of the University of Pennsylvania 2
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Venture Capital and the Finance of Innovation Corporate Strategy & Value Creation Lesson I: H&R Block H&R Block Expects to Meet Earnings Outlook KANSAS CITY, Mo. (Reuters) - H&R Block Inc. (HRB) said Thursday its tax preparations revenues rose 12.4 percent in January and February , putting it on track to meet its previously announced outlook for annual earnings and revenue. The Kansas City-based company said it had $1.2 billion in fees from tax preparation and related services in the first two months of the year. Total clients served rose 3.8 percent to 11.2 million, with the average fee per client up 9 percent to $115.93 . When H&R Block announced its third quarter earnings on eb 27 the company said it expected full- ear earnings of Feb. 27, the company said it expected full year earnings of $2.20 to $2.30 per share, an increase of 45 percent to 50 percent over last year's results. The company also projected annual revenue growth of 10 percent to 15 percent. Professor David Wessels The Wharton School of the University of Pennsylvania 3
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Venture Capital and the Finance of Innovation Corporate Strategy & Value Creation The Focus on Growth: In the Board Room Execution Growth “Solid execution by Tax Services in expanding retail locations in preparation for the upcoming tax filing season. The company now expects that an additional 1,000 H&R Block locations will be operating this tax season.” “Another successful year for H&R Block and our various businesses. We increased our revenue to $4.9 billion and generated net income of $491 million, or $1.49 per share.
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This note was uploaded on 09/08/2008 for the course FNCE 750 taught by Professor Wessels during the Spring '08 term at UPenn.

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01 - Corporate Strategy and Valuation - Venture Capital and...

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