Three years ago, you founded Outdoor Recreation, a retailer specialising in the sale of equipment and clothing for recreational activities such as camping, skiing and bushwalking. So far, your company has gone through three funding rounds:

Three years ago, you founded Outdoor Recreation, a retailer specialising in the sale of equipment and clothing for recreational activities such as camping, skiing and bushwalking. So far, your company has gone through three funding rounds: Round Class A Class Class C Shares 500 000 1 200 000 2 200 000 Share price (S) Date Feb 2013 You Investor 0.50 1.00 3.50 B Aug 2014 Angels Sept 2015 Venture capital It is now 2016 and you need to raise additional capital to expand your business. You have decided to take your firm public through an IPO. You would like to issue an additional 6.5 million new shares through this IPO. Assuming that your firm successfully completes its IPO, you forecast that 2016 net profit will be $8.0 million. a. Your investment banker advises you that the prices of other recent IPOs have been set such that the P/E ratios based on 2016 forecasted earnings average 20.8. Assuming that your IPO is set at a price that implies a similar multiple, what will your IPO price per share be? b. What percent of the firm will you own after the IPO