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

Round	Date	Investor	Shares	Share Price ($)
Series A	Feb. 2002	You	400,000	1.50
Series B	Aug. 2003	Angels	1,000,000	1.00
Series C	Sept. 2004	Venture Capital	2,200,000	3.25

It is currently 2012 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 2012 net income will be $

7.0 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 2007 forecasted earnings average

16.0. 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?