Three years ago, you founded Outdoor Recreation, Inc., a retailer specializing in the sale of equipment and clothing for recreational activities such as camping, skiing, and hiking. So far, your company has gone through three funding rounds:

Round Date Investor Shares Share Price ($)

Series A Feb. 2016 You 5,000,000 1.00 Series B Aug. 2017 Angels 1,100,000 2.00 Series C Sept. 2018 Venture capital 2,300,000 3.25 Currently, it is 2019 and you need to raise additional capital to expand your business. You have decided to take your firm public through an IPO. You would like to issue an additional 5 million new shares through this IPO. Assuming that your firm successfully completes this IPO, you forecast earnings before interest and taxes of $8 million this year.

a. Your investment banker advises you that the prices of other recent IPOs have been set such that the enterprise value/EBIT ratios based on 2019 forecasted earnings average 24.0.

Assuming that your IPO is set at a price that implies a similar multiple, what will your IPO price per share be?

b. What percentage of the firm will you own after the IPO?