Ferrari IPO Case Solution
(Marchionne, 2019).The company has included the syndicate of 7 underwriters in order to decrease the price securities and information asymmetry more accurately, as it implies that the issues with the large syndicate of 7 underwriters would be less under-priced as compared to the issue with fewer underwriters. The underwriters were involved in the price stabilization activities of Ferrari IPO for the limited period, during the security distribution. The underwriters have been engaged in posting the stabilization bids at or below the offering price, which in turn provided a stability in price during the initial trading of an IPO.
Question 3
For assessing and evaluating the future cash flows of the company; the discounted cash flow model is used, in which the cost of capital is assumed to be 5 percent. After assuming the cost of capital of 5 percent; the perpetuity growth model is used in which it is assumed that the cash flow will be growing with the constant growth rate of around 2 percent. However, it might be difficult to use this model, but it is crucial to determine the growth rate by which the cash flows will grow or are expected to grow.
The enterprise value of the Ferrari Company is 9,550 million dollars. The enterprise value is an essential useful tool which is used to find and measure the value of the company. It seems to be the alternative, which is comprehensive to the equity market capitalization.
Question 4
The share price of Ferrari is 50.53 per share in Euros and 57.48 per share in dollars. The current range of share price is between 48 US Dollars and 52 US Dollars, whereas the share price of the company is 57.48 per share in dollar, due to which it would be a wise decision to make investment in the stock of Ferrari as its price are more likely to have a significant increase in future....................
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