Bolt Power Company Limited has asked you to prepare a quantitative analysis report as part of the proposal to be submitted to Bangladesh Securities and Exchange Commission (BSEC) in order to get permission to start the proceedings for Initial Public Offering (IPO), which requires you to develop your views on the current and future capital structure and to determine fair value of the company’s stock. Your Managing Director has asked you to address the following question in your analysis: Determination of IPO offer price with justification Assumptions: Effective Tax Rate: 25% Risk-free Rate (BD 10-Yr Treasury Yield): 94% Pre-Tax Cost of Debt: 50% Bangladesh Historical Equity Risk Premium: 20% Terminal Growth Rate: 02% Current Interest Rate: 00% In addition to that, you have collected the following information: Bolt’s free cash flows for the next 4 years are as follows: BDT. 3 million, BDT. 6 million, BDT. 8 million, and BDT. 16 million. After the fourth year, free cash flow will grow at the terminal growth rate. Bolt’s WACC is 9%, the market value of its debt totals BDT 75 million, the company has BDT 15 million in non- operating assets, and it has the intention to issue 7.5 million shares of common stock. Note: Any financial data obtained from outside sources will not be applicable. Any publicly available information should only be used to gain an understanding of the company and the industry in which it operates. 1. need help in Determining of IPO offer price with justification
Bolt Power Company Limited has asked you to prepare a quantitative analysis report as part of the proposal to be submitted to Bangladesh Securities and Exchange Commission (BSEC) in order to get permission to start the proceedings for Initial Public Offering (IPO), which requires you to develop your views on the current and future capital structure and to determine fair value of the company’s stock. Your Managing Director has asked you to address the following question in your analysis:
- Determination of IPO offer price with justification
Assumptions:
- Effective Tax Rate: 25%
- Risk-free Rate (BD 10-Yr Treasury Yield): 94%
- Pre-Tax Cost of Debt: 50%
- Bangladesh Historical Equity Risk Premium: 20%
- Terminal Growth Rate: 02%
- Current Interest Rate: 00%
In addition to that, you have collected the following information:
Bolt’s free cash flows for the next 4 years are as follows: BDT. 3 million, BDT. 6 million, BDT. 8 million, and BDT. 16 million. After the fourth year,
Note: Any financial data obtained from outside sources will not be applicable. Any publicly available information should only be used to gain an understanding of the company and the industry in which it operates.
1. need help in Determining of IPO offer price with justification
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