The owners decide to take the company public through an IPO, issuing 1 million new shares. Assuming that they successfully complete the IPO, the net income for the next year is estimated to be $5 million

The founders and owners of a private company have funded it through the following rounds of investment:

Round Source Price Number of Shares
Series A Self $1.00 100,000
Series B Angel $1.00 225,000
Series C Venture Capital $1.25 375,000

The price of shares is set using average price-earnings ratios for similar businesses of 16. What will be the IPO price per share?
A) $12
B) $24
C) $9
D) $47

Answer: D