2. An analyst is evaluating an IPO (initial public offerings). He identifies a comparison firm with P/E=10 and debt-to-equity-0.5 (debt is assumed to be risk-free) He thinks the IPO should have a P/E (unlevered) equals to 70% of comparison firms, P/E (unlevered). The IPO is expected to earn 1,000 next year. The risk-free interest rate is 4% and the tax rate is 40% Find the value of the IPO if it has no debt