A company recently announced that it would be going public. The usual suspects, Morgan Stanley, JPMorgan...
A company recently announced that it would be going public. The usual suspects, Morgan Stanley, JPMorgan Chase, and Goldman Sachs will be the lead underwriters. The value of the company has been estimated to range from a low of $5billion to a high of $100billion, with $45billion being the most likely value. If there is a 20% chance that the price will be at the low end, a 10% chance that the price will be at the high end, and a 70% chance that the price will be in the middle, what value should the owner expect the company to price at?
Homework Answers
Solution
Expected value = Σ(possible value x probability) summed over all possible values
= (5 x 0.2) + (100 x 0.1) + (45 x 0.7)
= $42.5billion Answer
DONE
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