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 Series A Series BAug. 2014 Series C Shares 600,000 1,000,000 2,200,000 Investor Share Price ($) 1.00 2.00 2.50 Feb. 2013 You Angels Venture Capital Sept. 2015 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 6.0 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 18.7. 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 18.7 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 $ 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 % of the firm. (Round to one decimal place.)
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 Series A Series BAug. 2014 Series C Shares 600,000 1,000,000 2,200,000 Investor Share Price ($) 1.00 2.00 2.50 Feb. 2013 You Angels Venture Capital Sept. 2015 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 6.0 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 18.7. 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 18.7 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 $ 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 % of the firm. (Round to one decimal place.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text: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
Series A
Series BAug. 2014
Series C
Shares
600,000
1,000,000
2,200,000
Investor
Share Price ($)
1.00
2.00
2.50
Feb. 2013 You
Angels
Venture Capital
Sept. 2015
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 6.0 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 18.7.
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 18.7
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 $ 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 % of the firm. (Round to one decimal place.)
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