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Your investment banking client Uber is about to go public. You have gathered the following information concerning comparable companies whose stock is publicly traded: IPO

  1. Your investment banking client Uber is about to go public. You have gathered the following information concerning comparable companies whose stock is publicly traded:

IPO Pricing

Company

Price/Earnings Per Share

Price/Cash Flow Per Share

Price/Revenue Per Share

Price/Book

A

30

15

3.0

2.4

B

20

11

2.6

2.0

C

25

13

2.8

1.8

D

35

17

3.1

1.7

E

27

14

3.0

2.1

  1. Calculate the average values for each multiple.
  2. Using these average multiples estimate the implied price for Ubers shares assuming Ubers earnings per share are $0.50, cash flow per share are $1.00, revenue per share is $4.90, and book value per share is $7.10.
  3. Assuming all five companies are equally reliable comparables, estimate a fair value for Ubers shares assuming they are trading in the market.
  4. Deduct a 10% discount from this [freely traded] price to arrive at a price for Ubers IPO. What is the purpose behind the 10% discount?

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