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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 389M and earnings of 15M. Detox company has filed a registration statement with the SEC for its IPO. If the industry average MV/earnings and MV/revenues ratio for the recent fiscal year were 32.25 and 0.82 respectively. Estimate the IPO price for detox company using the MV, earnings ratio and assuming that they will issue 29M shares.

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Expert Solution

Market value to earning ratio=(market value / earning)

32.25=(market value / 15)

Market value of the company=(32.25*15)= 483.75

Initial public offering price= (total market value / number of shares)

= (483.75/39)=$16.68

Initial public offering price is $16.68

jeff jeffy answered 2 years ago
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