ABC Corporation is condsidering an IPO. ABC has 12 million shares of common stock owned by...

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ABC Corporation is condsidering an IPO. ABC has 12 millionshares of common stock owned by its founder and early investors.ABC has no preferred stock, debt, or short-term investments. Basedon its free cash flow projection, ABC's intrinsic value ofoperations is $210 million. ABC wants to raise $30 million (net offlotation costs) in net proceeds. The investment bank charges a 7%underwriting spread. All other costs associated with the IPO aresmall enough to be neglected in this analysis and all shares soldin the IPO will be newly issued shares. Answer the followingquestions.
Value of operations(V_Pre-IPO) $210 million
Number of existing shares(n_Existing) 12 million
Target net proceeds $30million
Flotation costs (F) 7%
1. Based on number of new shares sold in the IPO and the totalamount paid by the new shareholders, what is the offer price?
- Offer price = POffer =
2. Based on total value of the company after the IPO and thetotal number of outstanding shares after the IPO, what is theintrinsic price per share after the IPO?
- Price per share after the IPO = PPost-IPO =
3. Compare the pre-IPO price, the offer price, and the post-IPOprice. Explain why they are similar of different. (No calculationsare required.)

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1 Offer price Net proceeds Number of shares sold In order to arrive at number of shares sold it is essential to calculate pre IPO price of companys share The pre IPO price 210 12 million shares 175 See Answer

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ABC Corporation is condsidering an IPO. ABC has 12 millionshares of common stock owned by its founder and early investors.ABC has no preferred stock, debt, or short-term investments. Basedon its free cash flow projection, ABC's intrinsic value ofoperations is $210 million. ABC wants to raise $30 million (net offlotation costs) in net proceeds. The investment bank charges a 7%underwriting spread. All other costs associated with the IPO aresmall enough to be neglected in this analysis and all shares soldin the IPO will be newly issued shares. Answer the followingquestions.Value of operations(VPre-IPO)$210 millionNumber of existing shares(nExisting) 12 millionTarget net proceeds$30millionFlotation costs (F)7%1. Based on number of new shares sold in the IPO and the totalamount paid by the new shareholders, what is the offer price?- Offer price = POffer =2. Based on total value of the company after the IPO and thetotal number of outstanding shares after the IPO, what is theintrinsic price per share after the IPO? - Price per share after the IPO = PPost-IPO =3. Compare the pre-IPO price, the offer price, and the post-IPOprice. Explain why they are similar of different. (No calculationsare required.)

Value of operations(V_Pre-IPO)		$210 million
Number of existing shares(n_Existing)		12 million
Target net proceeds		$30million
Flotation costs (F)		7%