Estimate the value of nabor industries entire company

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Reference no: EM132376508

Nador 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 firms common stock value. The firms CFO has gathered data for performing the valuation using the free cash flow valuation model. The firms weighted average cost of capital is 12%, and it has $2,480,000 of debt at market value and $500,000 of preferred stock in terms of market value. The estimated free cash flows over the 5 years, 2020 through 2024, are given in the table. Beyond 2024 to infinity, the firms expects its free cash flow to grow 6% annually.

Year(t) Free cash flow (FCF)

2020 $220,000

2021 $260,000

2022 $300,000

2023 $330,000

2024 $390,000

  1. Estimate the value of Nabor Industries entire company by using the free cash flow valuation model.
  2. Use your finding in part a, along with the data provided above, to find Nabor Industries common stock value.
  3. If the firm plans to issue 200,000 shares of common stock, what is the estimated value per share?

Reference no: EM132376508

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