David Found a Company and Goes Through the Investment Rounds

question 55

Multiple Choice

David found a company and goes through the investment rounds shown below:
He decides to take the company public through an IPO,issuing 2 million new shares.Assuming that he successfully completes the IPO,the net income for the next year is estimated to be $8 million.His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses,which is 15.0.What will be the IPO price per share?

• A)$3.40
• B)$20.25
• C)$33.33
• D)$60.00

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Definitions:

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