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Firm A needs to know a possible target price for the IPO. We observe the following data for firms with similar projects: Company Share Price
Firm A needs to know a possible target price for the IPO. We observe the following data for firms with similar projects:
Company | Share Price | Earnings | EPS | |
Firm A | 70 | 1* | ||
Firm B | 100 | 50 | 2 | |
Firm C | 180 | 90 | 3 | |
Firm D | 250 | 120 | 5 |
*EPS for firm A are earnings divided by the number of shares at the IPO.
Which of the following is a good estimate of firm A's equity value?
a. 3500
b. 9800
c. 140
d. 50
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