You founded a social media company, called All Together, that was a startling success and is now ready for an IPO. The company had sales of $54 million and net income of $7.56 million in its most recent financial year. Your investment bankers collected the following information from your competitors at the time of their IPO: Company P/E ratio Price/Sales ratio Facebook 74.4 18.2 Google 26.6 5.8 Linkedin na 14.7 Twitter n/a 21.4 Your company will have 15 million shares outstanding after the IPO. Screenshot Attempt 1/3 for 10 pts. What should be the offer price based on P/E ratios? 25.50 Correct The average P/E ratio is (74.4 + 26.6)/2 = 50.5 Note that earnings (E) is the same as net income. The total market value of equity should thus be: V = P/E E = 50.5 * 7.56 million = 381.78 million Offer price per share: P V /N = 381.78 million/15 million = 25.45 Attempt 1/3 for 10 pts. Part 2 What should be the offer price based on Price/Sales ratios? No decimals You founded a social media company, called All Together, that was a startling success and is now ready for an IPO. The company had sales of $54 million and net income of $7.56 million in its most recent financial year. Your investment bankers collected the following information from your competitors at the time of their IPO: Company P/E ratio Price/Sales ratio Facebook 74.4 18.2 Google 26.6 5.8 Linkedin na 14.7 Twitter n/a 21.4 Your company will have 15 million shares outstanding after the IPO. Screenshot Attempt 1/3 for 10 pts. What should be the offer price based on P/E ratios? 25.50 Correct The average P/E ratio is (74.4 + 26.6)/2 = 50.5 Note that earnings (E) is the same as net income. The total market value of equity should thus be: V = P/E E = 50.5 * 7.56 million = 381.78 million Offer price per share: P V /N = 381.78 million/15 million = 25.45 Attempt 1/3 for 10 pts. Part 2 What should be the offer price based on Price/Sales ratios? No decimals