Question

In previous question, suppose the company intends to go public by selling 3,000,000 new shares. Moreover, assume the company has no debt but has an excess cash of $20 million, and the revenues for next year is estimated to be $25 million. Further assume thad the industry average forward EV-to-Sales multiple is 4, whereas the average trailing EV-to-Sales ratio is 5. What is the estimated IPO stock price

Answer 1

Answer:

A. $3.5 million

B. $120

Explanation:

A. Calculation for What is the post-money valuation for the last round of funding in dollars

First step is to calculate the total value of the company

Total value of the company = (200,000 + 100,000)* (150,000/100,000)

Total value of the company= (200,000 + 100,000)* $1.5

Total value of the company= 300,000 * $1.5 Total value of the company=$450,000

Now let calculate The post money valuation

Post money valuation = (200,000 + 100,000 + 400,000) * (2,000,000/400,000)

Post money valuation= (200,000 + 100,000 + 400,000) * $5

Post money valuation= 700,000 * $5

Post money valuation= $3.5 million

Therefore the post-money valuation for the last round of funding in dollars will be $3.5 million

B) Calculation for What is the estimated IPO stock price

First step is to calculate the EV

EV = $25 million * 5

EV= $100 million

Second step is to calculate the Total number of shares

Total number of shares = 700,000 + 300,000

Total number of shares = 1 million

Third step is to calculate the Equity

Equity = $100 million + $20 million

Equity = $120 million

Now let calculate the value per share

Value per share = $120 million/1 million

Value per share = $120

Therefore the estimated IPO stock price will be $120