question archive Company Detox, is a private company that designs, manufactures and distributes certain consumer products
Company Detox, is a private company that designs, manufactures and distributes certain consumer products
Subject:BusinessPrice:2.84 Bought6
Company Detox, is a private company that designs, manufactures and distributes certain consumer products. In this fiscal year, Detox had revenues of $401M and earnings of $21M. Detox company has filed a registration statement with the SEC for its IPO. If the industry average MV/Earnings ratio and MV/Revenues ratio for the recent fiscal year were 27.55 and 1.09 respectively. Estimate the IPO price for Detox Company using the MV/Revenues ratio and assuming that they will issue 33M shares.
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IPO price = 38.25 / 22 = $13.25 per share
Step-by-step explanation
Based on MV/Revenues ratio;
Total value of Detox = revenues* MV/Revenues ratio = 401*1.09 = 437.09 million
IPO price = Total value of Detox/number of shares
IPO price = 437.09/33
IPO price = 38.25 / 22 = $13.25 per share
