× If the firm plans to issue 200,000 shares of common stock, what is the estimated market value per share? (Ex Oo.00) No dollar sign, 2 decimal points * Free cash flow valuation Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Nabor have decided to make their own estimate of the firm's common stock value. The firm's CFO has gathered data for performing the valuation using the free cash flow valua- tion model. The firm's weighted average cost of capital is 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2007 through 2011, are given below. Beyond 2011 to infinity, the firm expects its free cash flow to grow by 3% annually. Year (t) Free cash flow (FCF) 2007 $200,000 2008 250,000 2009 310,000 2010 3.50,000 2011 390,000 10.76 Correct answer 10.96

× If the firm plans to issue 200,000 shares of common stock, what is the estimated market value per share? (Ex Oo.00) No dollar sign, 2 decimal points * Free cash flow valuation Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Nabor have decided to make their own estimate of the firm's common stock value. The firm's CFO has gathered data for performing the valuation using the free cash flow valua- tion model. The firm's weighted average cost of capital is 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2007 through 2011, are given below. Beyond 2011 to infinity, the firm expects its free cash flow to grow by 3% annually. Year (t) Free cash flow (FCF) 2007 $200,000 2008 250,000 2009 310,000 2010 3.50,000 2011 390,000 10.76 Correct answer 10.96

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 5P

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