The Hardigree Hamburger chain is a closely held corporation with 400,000 shares of common stock outstanding. The

Question:

The Hardigree Hamburger chain is a closely held with 400,000 shares of outstanding. The owners would like to take the company public by issuing another 600,000 shares and selling them to the general public in an initial public offering (IPO). Benson’s Burgers is a similar chain that operates in another part of the country. Its stock is publicly traded at a price earnings (P/E) ratio of 25. Hardigree had net income of $2,500,000 in 2006.
a. How much is Hardigree likely to raise with its public offering?
b. What will the public offering imply about the wealth of the current owners?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...