Question

Three years​ ago, you founded Outdoor​ Recreation, Inc., a retailer specializing in the sale of equipment and clothing for recreational activities such as​ camping, skiing, and hiking. So​ far, your company has gone through three funding​ rounds:

Round	Date	Investor	Shares	Share Price​ ($)
Series A	Feb. 2013	You	600,000	1.00
Series B	Aug. 2014	Angels	1,300,000	1.00
Series C	Sept.2015	Venture Capital	2,000,000	2.50

It is now 2016 and you need to raise additional capital to expand your business. You have decided to take your firm public through an IPO. You would like to issue an additional 5.0 million new shares through this IPO. Assuming that your firm successfully completes its​ IPO, you forecast that 2016 net income will be $7.5 million.a. Your investment banker advises you that the prices of other recent IPOs have been set such that the​ P/E ratios based on 2016 forecasted earnings average 18.4.

Assuming that your IPO is set at a price that implies a similar​ multiple, what will be your IPO price per​ share?

b. What percent of the firm will you own after the​ IPO?

a. Your investment banker advises you that the prices of other recent IPOs have been set such that the​ P/E ratios based on  2016 forecasted earnings average 18.4.

Assuming that your IPO is set at a price that implies a similar​ multiple, what will be your IPO price per​ share?The IPO price will be

​$nothing

per share.  ​(Round to the nearest​ cent.)

b. What percent of the firm will you own after the​ IPO?

After

the​ IPO, you will own

nothing​%

of the firm.  ​(Round to one decimal​ place.)

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

OPTIMAL RISKY PORTFOLIO VC AMORT SINKING JORDAN - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins Formulas - 2x 11 A A = = = V General Wrap Text Merge & Center AutoSum - A Fill 2 Sort & m Find & - - A- ES E E $ % 48.08 Insert Delete Format File Home Insert Page Layout % Cut Calibri Ea Copy Paste BIU D Format Painter Clipboard Font BS40 five BG BH BI Conditional Format Formatting as Table Styles Cell Styles 2 Clear Filter Editing Select Alignment Number Cells BJ B K BL BM BN BO BP BQ BR BS BT BU BV 26 P/E = MARKET PRICE/EPS 27 28 29 30 WE CAN USE ABOVE FORMULA TO CALCULATE VALUE OF THE FIRM 31 32 33 18.4 = VALUE OF THE FIRM /NET INCOME 18.4 = VALUE OF THE FIRM /7.5 VALUE OF THE FIRM = 138.00 MILLION (18.4 X 7.5] 34 NOW EXISTING NUMBER OF SHARES 3900000 [600000 + 1300000 + 2000000] ADD: ADDITIONAL SHARES TO BE ISSUED 5000000 TOTAL NO OF SHARES AFTER IPO 8900000 [ = 8.9 MILLION] ANSWER PRICE PER SHARE = 15.51 [138 MILLION/8.9 MILLION] 35 36 37 38 39 40 41 42 43 44 HEM Red AFTER IPO, YOU WILL OWN 600000 SHARES OUT OF TOTAL 8900000 SHARES SO OWNERSHIP % = 600000/8900000 = 6.7% BEST CALBINOMIAL 2 TIME SINKING AMORTIZA Sheet2 vc JORDAN INSURANCE Sheet1 Sheet3 Sheet4 Sheets Sheeto greta T 0 MIN VAR PORT ferences 0 +) Sheets 0 IC THE TW 130% 6 * * O 2. 9 ENG 30-11-2019