Three yearsago, you founded OutdoorRecreation, Inc., a retailer specializing in the sale of equipment and clothing for recreational activities such ascamping, skiing, and hiking. Sofar, your company has gone through three fundingrounds:

Round

Date

Investor

Shares

Share Price($)

Series A

Feb. 2013

2013

You

500 comma 000

500,000

1.50

1.50

Series B

Aug. 2014

2014

Angels

1 comma 000 comma 000

1,000,000

2.50

2.50

Series C

Sept. 2015

2015

Venture Capital

2 comma 000 comma 000

2,000,000

3.00

3.00

It is now 2016

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 5.5

5.5 million new shares through this IPO. Assuming that your firm successfully completes itsIPO, you forecast that 2016

2016 net income will be $ 8.0

$8.0 million.

a. Your investment banker advises you that the prices of other recent IPOs have been set such that theP/E ratios based on2016

2016 forecasted earnings average 19.2

19.2. Assuming that your IPO is set at a price that implies a similarmultiple, what will be your IPO price pershare?

b. What percent of the firm will you own after theIPO?

a. Your investment banker advises you that the prices of other recent IPOs have been set such that theP/E ratios based on2016

2016 forecasted earnings average 19.2

19.2. Assuming that your IPO is set at a price that implies a similarmultiple, what will be your IPO price pershare?

The IPO price will be $

nothing

per share.(Round to the nearestcent.)

b. What percent of the firm will you own after theIPO?

After theIPO, you will own

nothing

% of the firm.(Round to one decimalplace.)