Question
Etna Tech is a company set up by two friends, Larry and Mike. The companys only product is a popular online game called Fisticuffs. Etna
Etna Tech is a company set up by two friends, Larry and Mike. The companys only product is a popular online game called Fisticuffs. Etna Tech will be holding an IPO of 5 million shares tomorrow. Market expectations are high for this IPO. The company is expected to pay $1 per share starting one year from now. The dividends are then expected to grow at a supernormal rate of 30% for three years, before dropping down to 15% for three more years, and then to 5% afterwards. What is the total value of this IPO if the required return for similar issues is 18%?
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