What is the fraction of ownership does the firm need to sell

Reference no: EM132184063

Question - Through IPO, an investment bank is helping a manufacturing firm to issue new equity to finance the firm's $120 million investment project that has a present value of $165 million. The firm has a debt of $45.1 million in place. The firm's average annual earnings has been $12.8 million, and EBITDA $17 million. P/E and V/EBITDA ratios of similar firms without debt are 14 and 11.3, respectively.

a) If the issuing firm wants to increase its old shareholders wealth by a minimum of 20% with the issuance and investment, what is the maximum issuance costs (IC) the investment bank can charge?

b) Given the IC calculated above, what is the fraction of ownership does the firm need to sell to the new investors?

c) If the target share price after the issuance is $22.60, how many shares need to be sold to the new investors?

Reference no: EM132184063

Questions Cloud

How do you think the nature of leadership in work : How have advances in information technology changed the way organizations are structured and designed today?

Identify three possible dissertation research topics : Identify three (3) possible dissertation research topics related to organizational leadership. Make sure your topics are current and relevant to the field.

Discuss about the impact of the marketing campaign : Reflect on the impact of the marketing campaign on your own health care decision making. Consider how the campaign positively or negatively influenced.

What is the allocation to equity today : You also have $100,000 saved up by the end of 10 years with the return on investment of 10% per year. What is the allocation to equity today

What is the fraction of ownership does the firm need to sell : Given the IC calculated above, what is the fraction of ownership does the firm need to sell to the new investors

Why that type of auction is appropriate for product-service : Auctions are widely used in finance, e-commerce and in e-games. Identify 3 applications of auctions used in finance, e-commerce and/or e-games.

What kinds of applications are described here : What kinds of applications are described here? What business functions do they support? How do they improve operational efficiency and decision making?

What is the effective interest rate per year : A loan of $15,000 requires monthly payments of $477 over a 36-month period of time. What is the effective interest rate per year

How the leaders leadership approach could impact team : How your chosen approach could impact your organization's leaders' ability to exert influence on others and thereby impacting team effectiveness.

User Account

All Pages