An investment bank is taking a firm public. The bank finds that recently five firms from...

An investment bank is taking a firm public. The bank finds that recently five firms from the same industry went public at an average offer price per share to EBITDA per share ratio of 7.5. If the private firm’s EBITDA is $1.2 per share for the most recent year, then an offer price estimate would be

A.$7.5

B.$8.5

C.$9.0

D.$10

Solutions

Expert Solution

While deciding offer price of an ipo (initial public offer) many factors are considered. One of which is comparison with the firms within the same industry. In given case the firms within the same industry went public at 7.5 of EBTIDA ratio. Hence it can be taken as base.

Therefore,

Offer price estimate = 7.5 × EBITDA OF Firm GOING

Public

= 7.5 × $ 1.2

Offer price estimate = $ 9.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Progressive Inc. (Progressive) is an investment company that recently raised $3,000,000 from a public financing. The...

Progressive Inc. (Progressive) is an investment company that recently raised $3,000,000 from a public financing. The Board of Directors has instructed the CFO to invest up to $2,000,000 in investments that it intends to actively trade and therefore will account for these investments at fair value through profit or loss. On the advice of the company’s investment advisor, the following shares were purchased in October 2019: Investment # of shares Total cost $ Giant Inc 25,000 1,000,000 Monarch Bank of...

Alan is taking out a $15,000 loan from a bank to renovate hishouse. The bank...

Alan is taking out a $15,000 loan from a bank to renovate his house. The bank is charging him an interest rate of 4% p.a., monthly compounding. The loan has to be repaid in 60 equal monthly instalments, with the first payment due a month from now).(a) (2 points) How much is each monthly payment?(b) (3 points) For the 24th payment (i.e., the payment that he will make 2 yearsfrom now), what is the ratio between (i) the portion of...

A prestigious investment bank is expected to initiate its quarterly dividend of $1 five years from...

A prestigious investment bank is expected to initiate its quarterly dividend of $1 five years from today and the dividend it expected to remain constant permanently. What is the price of the banks stock if the stated annual interest rate is 12% compounded quarterly?

From a transaction cost perspective, discuss why a firm may contract with an investment bank to...

From a transaction cost perspective, discuss why a firm may contract with an investment bank to underwrite or place an issue.

Maurice has recently graduated from University and started working for a small public accounting firm who...

Maurice has recently graduated from University and started working for a small public accounting firm who specialise in providing taxation services to a range of clients. He has just returned from a review interview with one of the partners and is upset because the partner was not happy with the quality of the work papers he has prepared to support the income tax return for a client. Explain to Maurice the reasons why quality work papers are important, what should...

A firm would like to finance an investment by taking out a loan that requires 10...

A firm would like to finance an investment by taking out a loan that requires 10 fixed annual payments, with the first payment due in one year. The bank will require a return of 6.5% on this loan. The firm plans to borrow $450,000 using this loan. [Use annuity formulas to answer the questions below.] a. What will the firm’s annual payments be? b. Check your calculation by computing the present value of those annual payments, using the rate of...

An Investment Bank compared the profiles of a sample of 25 firms that merged during 1985...

An Investment Bank compared the profiles of a sample of 25 firms that merged during 1985 to 2005 with those of a sample of 25 firms that did not merge. The table displays the information obtained on the firms' price earnings ratio. Price-Earnings Ratio Merged Firms Non-Merged Firms Sample Mean 7.3 14.7 Sample Standard Deviation 11.0 16.0 a) At the 5% significance level, carry out a hypothesis test to investigate if the two population variances are equal. [2 marks] b)...

ABC C.o just completed an IPO with an investment bank on a firm-commitment basis. The firm...

ABC C.o just completed an IPO with an investment bank on a firm-commitment basis. The firm issues 5 million shares of common stock, and the underwriting fees were $2.09 per share. The offering price was $30.00 per share. (a) What were the total proceeds from the common stock sale? Total Proceeds $ ______________-.

Question: Find an article about a private or public projectthat a firm or government recently completed....

Question: Find an article about a private or public projectthat a firm or government recently completed. Analyze the project and discuss what theincremental benefits and costs to the firm and to society would be if the size or scope ofthe project was to be expanded. Are the incremental benefits larger than the incrementalcosts and should the project have been expanded? What role would bonds play infunding these operations and/or shifting the costs to the future? Defend your answer andcite your...

You have recently been hired by Jones & Co, a small public accounting firm as an...

You have recently been hired by Jones & Co, a small public accounting firm as an internal auditor. One of the firm's partners, Joe Jones, has asked you to deal with an unhappy client. The client, Susan Swan, is the owner of the city's largest jewelry store, DiamondsRUs. Ms Swan wants to remodel her store and is applying for $80,000 loan with Planters National Bank. The bank requires the use of accrual basis accounting for financial statements. Ms Swan insists that...

Subjects