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. 2002	You	600,000

Series B

Aug. 2003

Angels

1,300,000

Series C

Sept. 2004

Venture Capital

2,300,000

It is currently 2012 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 5.0million new shares through this IPO. Assuming that your firm successfully completes its​IPO, you forecast that 2012 net income will be $8.0million.  

a. Your investment banker advises you that the prices of other recent IPOs have been set such that the​P/E ratios based on 2007 forecasted earnings average 16.0 times . Assuming that your IPO is set at a price that implies a similar​multiple,what will your IPO price per share​be?

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

Answer 1

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