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 valuation model. The firm's weighted average cost of capital is 12%, and it has $2,510,000 of debt at market value and $500,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years, 1 through 5, are given in the table attached. After year 5, the firm expects its free cash flow to grow by 4% annually. a.Estimate the value of Nabor Industries' entire company by using the free cash flow valuation model. b.Use your finding in part a, along with the data provided above, to find Nabor Industries' common stock value. c. If the firm plans to issue 200,000 shares of common stock, what is its estimated value per share?
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 valuation model. The firm's weighted average cost of capital is 12%, and it has $2,510,000 of debt at market value and $500,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years, 1 through 5, are given in the table attached. After year 5, the firm expects its free cash flow to grow by 4% annually. a.Estimate the value of Nabor Industries' entire company by using the free cash flow valuation model. b.Use your finding in part a, along with the data provided above, to find Nabor Industries' common stock value. c. If the firm plans to issue 200,000 shares of common stock, what is its estimated value per share?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 18MCQ
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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 valuation model. The firm's weighted average cost of capital is 12%, and it has $2,510,000 of debt at market value and $500,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years, 1 through 5, are given in the table attached. After year 5, the firm expects its free cash flow to grow by 4% annually.
a.Estimate the value of Nabor Industries' entire company by using the free cash flow valuation model.
b.Use your finding in part a, along with the data provided above, to find Nabor Industries' common stock value.
c. If the firm plans to issue 200,000
shares of common stock, what is its estimated value per share?
shares of common stock, what is its estimated value per share?
Transcribed Image Text:요
N 34 5
II
por Industries' common stock value.
mated value per share?
Data table
X -
(Click on the icon here in order to copy the contents of the data table below
into a spreadsheet.)
Year (t)
Free cash flow (FCF)
$300,000
1.
$360,000
$410,000
$450,000
$490,000
Print
Done
e help -
Media -
FZ
F11
F12
VI
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