# g. Compare the pre-IPO price, the offer price, and the post-IPO price. Explain why they are similar or different. (No calculations are required.)

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Start with the partial model in the file Ch18 P06 Build a Model.xlsx on the textbook’s Web site. Lingadalli Corporation (LC) is considering an IPO. LC has 12 million shares of common stock owned by its founder and early investors. LC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, LC’s intrinsic value of operations is $210 million. LC wants to raise $30 million (net of flotation costs) in net proceeds. The investment bank charges a 7% underwriting spread. All other costs associated with the IPO are small enough to be neglected in this analysis, and all shares sold in the IPO will be newly issued shares. Answer the following questions. Start with the partial model in the file Ch18 P06 Build a Model.xlsx on the textbook’s Web site. Lingadalli Corporation (LC) is considering an IPO. LC has 12 million shares of common stock owned by its founder and early investors. LC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, LC’s intrinsic value of operations is $210 million. LC wants to raise $30 million (net of flotation costs) in net proceeds. The investment bank charges a 7% underwriting spread. All other costs associated with the IPO are small enough to be neglected in this analysis, and all shares sold in the IPO will be newly issued shares. Answer the following questions. Start with the partial model in the file Ch18 P06 Build a Model.xlsx on the textbook’s Web site. Lingadalli Corporation (LC) is considering an IPO. LC has 12 million shares of common stock owned by its founder and early investors. LC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, LC’s intrinsic value of operations is $210 million. LC wants to raise $30 million (net of flotation costs) in net proceeds. The investment bank charges a 7% underwriting spread. All other costs associated with the IPO are small enough to be neglected in this analysis, and all shares sold in the IPO will be newly issued shares. Answer the following questions. Start with the partial model in the file Ch18 P06 Build a Model.xlsx on the textbook’s Web site. Lingadalli Corporation (LC) is considering an IPO. LC has 12 million shares of common stock owned by its founder and early investors. LC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, LC’s intrinsic value of operations is $210 million. LC wants to raise $30 million (net of flotation costs) Start with the partial model in the file Ch18 P06 Build a Model.xlsx on the textbook’s Web site. Lingadalli Corporation (LC) is considering an IPO. LC has 12 million shares of common stock owned by its founder and early investors. LC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, LC’s intrinsic value of operations is $210 million. LC wants to raise $30 million (net of flotation costs) in net proceeds. The investment bank charges a 7% underwriting spread. All other costs associated with the IPO are small enough to be neglected in this analysis, and all shares sold in the IPO will be newly issued shares. Answer the following questions. Start with the partial model in the file Ch18 P06 Build a Model.xlsx on the textbook’s Web site. Lingadalli Corporation (LC) is considering an IPO. LC has 12 million shares of common stock owned by its founder and early investors. LC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, LC’s intrinsic value of operations is $210 million. LC wants to raise $30 million (net of flotation costs) in net proceeds. The investment bank charges a 7% underwriting spread. All other costs associated with the IPO are small enough to be neglected in this analysis, and all shares sold in the IPO will be newly issued shares. Answer the following questions. Start with the partial model in the file Ch18 P06 Build a Model.xlsx on the textbook’s Web site. Lingadalli Corporation (LC) is considering an IPO. LC has 12 million shares of common stock owned by its founder and early investors. LC has no preferred stock, debt, or short-term investments. Based on its free cash flow projection, LC’s intrinsic value of operations is $210 million. LC wants to raise $30 million (net of flotation costs) in net proceeds. The investment bank charges a 7% underwriting spread. All other costs associated with the IPO are small enough to be neglected in this analysis, and all shares sold in the IPO will be newly issued shares. Answer the following questions. |

Explanation

Required a)

Given,

LC's intrinsic Value operations = $210 million

LC's oustanding shres = 12 million shares of common stock

Intrinsic stock price before the IPO = LC's intrinsic Value operations / LC's oustanding shres

Intrinsic stock price before the IPO = $210 million / 12 million shares of common stock

Intrinsic stock price before the IPO = $17.50 per share

Therefore, the Intrinsic stock price before the IPO is $17.50 per share.

Answer

Intrinsic stock price before the IPO = $17.50 per share

Therefore, the Intrinsic stock price before the IPO is $17.50 per share.