A company wants to have an IPO and raise $10 million to finance a new plant....

 

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A company wants to have an IPO and raise $10 million to finance a new plant. Currently it has 1,000 shares of stock outstanding, its last reported earnings figure was $5 million, and its book value is $70 million. Comparable companies sell at a P/E of about 20 and have a Market/Book ratio of about 3 times. The investment bankers want to price the shares at about $15 per share. How should the company proceed? A company wants to have an IPO and raise $10 million to finance a new plant. Currently it has 1,000 shares of stock outstanding, its last reported earnings figure was $5 million, and its book value is $70 million. Comparable companies sell at a P/E of about 20 and have a Market/Book ratio of about 3 times. The investment bankers want to price the shares at about $15 per share. How should the company proceed?

Answer rating: 100% (QA)

To determine how the company should proceed with its IPO we need to consider several factors including the desired funding amount the companys financi... View the full answer