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.

Comparable Company Price/Earnings Price/Revenues

Eanie 12.4 1.6

Meenie 14.6 1.4

Minie 16.2 1.2

Moe 20.4 0.8

Part 1. Based upon the price/revenue ratio, what would be a reasonable value for KD?

Part 2. Based upon the price/earnings ratio, what would be a reasonable value for KD?

Part 3. Suppose that

Pre-IPO value of equity is V_Pre-IPO = $500 million

Number of existing shares is n_Existing = 8 million

Amount company needs to raise is Net proceeds = $27 million

Underwriter spread is F = 10%

What is the net proceeds for IPO, what is the gross proceeds for IPO?

Part 4. What is the Post-IPO equity?

Part 5. Determine percentage of post-IPO value of the firm that new investors require?

Part 6. Existing share before IPO is 8million. After IPO, how many shares needed to be issued to the new shareholders to provide them with the required percentage share of value (from part 5)?

Part 7. Determine the IPO share price.