First Firm was founded by a lady. She founded it with $1,753 of her own money....
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First Firm was founded by a lady. She founded it with $1,753 of her own money. Upon founding and investing her own money, she issued herself 189 shares. One year later, an angel investor purchased 123 shares for $1,136. Last year, the founder sold 156 shares for $1,299 to a VC. Now the lady is considering having an IPO and selling 149 new shares in that IPO. The firm's net income next year is expected to be $1,047. Similar firms have PE ratios of 27. What will the share price be at the time of the IPO? Assume perfect capital markets. First Firm is considering making an investment of $159 today. If it did so, the one-year investment would pay out $237 in 12 months. First Firm will fund part of the investment with a bank loan. Specifically, it will borrow $84 at an interest rate of 0.06. The rest of the investment will be funded with equity. What is the return on levered equity in this situation? First Firm was founded by a lady. She founded it with $1,753 of her own money. Upon founding and investing her own money, she issued herself 189 shares. One year later, an angel investor purchased 123 shares for $1,136. Last year, the founder sold 156 shares for $1,299 to a VC. Now the lady is considering having an IPO and selling 149 new shares in that IPO. The firm's net income next year is expected to be $1,047. Similar firms have PE ratios of 27. What will the share price be at the time of the IPO? Assume perfect capital markets. First Firm is considering making an investment of $159 today. If it did so, the one-year investment would pay out $237 in 12 months. First Firm will fund part of the investment with a bank loan. Specifically, it will borrow $84 at an interest rate of 0.06. The rest of the investment will be funded with equity. What is the return on levered equity in this situation?
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