Suppose that you are trying to value an IPO of a start-up in biotech industry. The firms current book value is $54 million. The company also has bank debt with face value of $40 million that was issued 5 years ago with yield of 15% and time to maturity of 10 years (so this debt is due in five years at the time of IPO). Bonds with similar risk profile currently yield 17% per year while the risk-free rate is 3% per year. Your investigation of the biotech industry indicates that about half the firms that attempt a public offering end up liquidated within two years. A few successful businesses, however, have managed to generate a sustainable profit stream after a few years of operations. You summarize your findings as follows. The average IPO firm in the industry has a market value of equity of $80 million, the book value of assets of $20 million, and debt to equity ratio (calculated using book values) of 0.8. Five years after the IPO, the average market capitalization (i.e., the market value of equity) for firms still on the market is $500 million, while those firms that were liquidated have an average liquidation value of 1.5 million. Using a binomial option pricing model, estimate the offer price for the start-up assuming that 7 million shares will be outstanding after the offer. How much money will the company raise if the underwriter spread on this issue is 8% and it sells 5 million shares in the offering?