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?

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Definitions:

Material Cost

The expense incurred to acquire raw materials needed to produce a product or complete a project.

Break-Even

The instance where cumulative spending equals cumulative earnings, causing neither a financial gain nor a deficit.

Variable Costs

Costs that vary directly with the level of production or output.

Fixed Costs

Fixed expenses that are unaffected by the amount of goods produced or sold, for example, rent, salaries, and insurance payments.