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:

Currently, it is $2012$ 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 $6\mathrm{.}5$ million

new shares through this IPO. Assuming that your firm successfully completes its IPO, you forecast

that $2012$ net income will be $$7\mathrm{.}5$ 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 $2012$ forecasted earnings average $20\mathrm{.}0.$ Assuming that your IPO is

set at a price that implies a similar multiple, what will your IPO price per share be$?$

b$.$ What percentage of the firm will you own after the IPO?