Burlap Fashions (BFS), a successful fashion designer, hired you to price their upcoming IPO. The plan...

Burlap Fashions (BFS), a successful fashion designer, hired you to price their upcoming IPO. The plan is for BFS to issue 200 million shares. Being an unlisted company, you decide to price BFS off three close and similar publicly traded competitors, Silk & Wool (SWL), Rag & Tarp (RGT), and CowTown (CTN) fashion.

You know that SWL, RGT, and CTN EV/EBIT multiples are 11.0x, 12.0x, and 13.0x, respectively. You estimated that BFS' forward EBIT for 2021 amounts to $500 million and that the firm has $1billion in debt and $1 billion in cash. At what stock price should you bring BFS to the market.

A: 60

B 45

C 6

D 30

Expert Solution

jeff jeffy answered 3 years ago

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