Exhibit 7

ROSETTA STONE, INC.: PRICING THE 2009 IPO

Financial Forecast for Rosetta Stone (in millions of dollars except percentages)
actual estimate
2008A 2009E 2010E 2011E 2012E 2013E 2014E

Revenue growth 52.5% 35.0% 35.0% 30.0% 25.0% 23.0% 21.0%

Gross margin 86.3% 86.0% 86.0% 85.0% 84.0% 83.0% 82.0%
SGA exp / Revenue 63.5% 63.5% 63.5% 63.0% 63.0% 62.5% 62.5%
R&D exp / Revenue 8.8% 9.0% 9.0% 8.5% 8.5% 8.5% 8.5%

Capital expenditures 7.0 5.0 8.0 9.0 9.5 10.0 11.0

NPPE turnover 13.5 15.0 15.2 15.4 15.6 15.8 16.0
NWC turnover 8.9 9.0 9.0 9.0 8.5 8.5 8.0

Revenue 209.4 282.7 381.6 496.1 620.1 762.7 922.9

Gross profit 180.7 243.1 328.2 421.7 520.9 633.1 756.8
SGA expense 133.0 179.5 242.3 312.5 390.7 476.7 576.8
R&D expense 18.4 25.4 34.3 42.2 52.7 64.8 78.4
EBIT 29.4 38.2 51.5 67.0 77.5 91.5 101.5

Net working capital 23.4 31.4 42.4 55.1 73.0 89.7 115.4
Net PPE 15.7 18.8 25.1 32.2 39.7 48.3 57.7

Valuation
Terminal growth rate 4.0%
Discount rate 10.0%
Shares outstanding (000s) 17.2
Debt value 1.0
Tax Rate 38%
0 1 2 3 4 5 6
NOPAT
+ Depreciation 1.9 1.7 1.9 2.0 1.5 1.6
- Capex
- Change in NWC 8.0 11.0 12.7 17.8 16.8 25.6
Free cash flow
Terminal value

Discounted value
Total value
Equity value
Share price
Net PPEn= Net PPEn-1+CAPEXn-Depreciation
Depreciation= Net PPEn-1-Net PPEn+CAPEX
pt percentages)

2015E 2016E 2017E 2018E

18.0% 13.0% 10.0% 5.0%

81.0% 80.0% 79.0% 78.0%
62.5% 62.5% 62.5% 62.5%
8.0% 8.0% 8.0% 8.0%

11.0 9.0 8.0 5.0

16.2 16.4 16.8 17.3
8.0 8.0 8.0 8.0

1,089.0 1,230.6 1,353.6 1,421.3

882.1 984.5 1,069.4 1,108.6
680.6 769.1 846.0 888.3
87.1 98.4 108.3 113.7
114.3 116.9 115.1 106.6

136.1 153.8 169.2 177.7

67.2 75.0 80.6 82.2

7 8 9 10

1.5 1.2 2.5 3.4

20.8 17.7 15.4 8.5

 Exhibit 7
ROSETTA STONE, INC.: PRICING THE 2009 IPO
Financial Forecast for Rosetta Stone (in millions of dollars except percentages)
actual estimate
2008A 2009E 2010E 2011E 2012E 2013E 2014E

Revenue growth 52.5% 35.0% 35.0% 30.0% 25.0% 23.0% 21.0%

Gross margin 86.3% 86.0% 86.0% 85.0% 84.0% 83.0% 82.0%
SGA exp / Revenue 63.5% 63.5% 63.5% 63.0% 63.0% 62.5% 62.5%
R&D exp / Revenue 8.8% 9.0% 9.0% 8.5% 8.5% 8.5% 8.5%

Capital expenditures 7.0 5.0 8.0 9.0 9.5 10.0 11.0

NPPE turnover 13.5 15.0 15.2 15.4 15.6 15.8 16.0
NWC turnover 8.9 9.0 9.0 9.0 8.5 8.5 8.0

Revenue 209.4
Gross profit 180.7
SGA expense 133.0
R&D expense 18.4
EBIT 29.4 0.0 0.0 0.0 0.0 0.0 0.0

Net working capital 23.4 0.0 0.0 0.0 0.0 0.0 0.0
Net PPE 15.7 0.0 0.0 0.0 0.0 0.0 0.0

Valuation
Terminal growth rate 4.0%
Discount rate 10.0%
Shares outstanding (000s) 17.2
Debt value 1.0

0 1 2 3 4 5 6
NOPAT
+ Depreciation
- Capex
- Change in NWC
Free cash flow
Terminal value

Discounted value
Total value
Equity value
Share price
pt percentages)

2015E 2016E 2017E 2018E

18.0% 13.0% 10.0% 5.0%

81.0% 80.0% 79.0% 78.0%
62.5% 62.5% 62.5% 62.5%
8.0% 8.0% 8.0% 8.0%

11.0 9.0 8.0 5.0

16.2 16.4 16.8 17.3
8.0 8.0 8.0 8.0

0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0

7 8 9 10 11
NPPE turnover= Sales/ Net PPC
Net PPE Err:509
NWC turnover= Sales/NWC
NWC=sales/NWC turnover