You are the owner of a small and successful firm with an estimated market value of $50 million. You are considering going public.

a. What are the considerations you would have in choosing an investment banker?

b. You want to raise $20 million in new financing, which you plan to reinvest back in the firm. (The estimated market value of $50 million is based on the assumption that this $20 million is reinvested.) What proportion of the firm would you have to sell in the IPO to raise $20 million?

c. How would your answer to b change if the investment banker plans to underprice your offering by 10%?

d. If you wanted your stock to trade in the $20–25 range, how many shares would you have to create? How many shares would you have to issue?