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Company Detox, is a private company that designs, manufactures and distributes certain consumer products. In this...

Company Detox, is a private company that designs, manufactures and distributes certain consumer products. In this fiscal year, Detox had revenues of $404M and earnings of $18M. Detox company has filed a registration statement with the SEC for its IPO. If the industry average MV/Earnings ratio and MV/Revenues ratio for the recent fiscal year were 30.62 and 0.85 respectively. Estimate the IPO price for Detox Company using the MV/Earnings ratio and assuming that they will issue 22M shares.

Solutions

Expert Solution

Total market value of company= (market value / earning)

(30.62*18)= market value

=551.16

Initial public offering price= (total market value / number of shares)= (551.16/22)= $ 25.05

jeff jeffy answered 2 years ago
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