Use the Information for the Question(s)below

question 25

Essay

Use the information for the question(s)below.
During the most recent fiscal year,KD Industries had revenues of $400 million and earnings of $30 million.KD has filed a registration statement with the SEC for its IPO.Before it is offered,KD's investment bankers would like to estimate the value of the company using comparable companies.The investment bankers have assembled the following information based on data for other companies in the same industry that have recently gone public.In each case,the ratios are based upon the IPO price.
-Based upon the price/earnings ratio,what would be a reasonable value for KD?

---

Definitions:

Small Firms

Companies with a smaller market capitalization, often characterized by higher potential growth and higher risk.

Large Firms

Companies that have a significant market capitalization, often characterized by a large amount of assets, revenues, and employees.

Risk Premium

The additional return expected from an investment for taking on a higher level of risk.

Holding Period

Refers to the duration of time an investment is held by an investor, impacting the tax treatment of any capital gains.