Reference no: EM133165153
Question - 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.
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Year (t)
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Free Cash flow (FCF)
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2020
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$260,000
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2021
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$330,000
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2022
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$360,000
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|
2023
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$430,000
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2024
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$460,000
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The? firm's weighted average cost of capital is 13%?, and it has $2,260,000 of debt at market value and $450,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5? years, 2020 through 2024?, are given in the? table, Beyond 2024 to? infinity, the firm expects its free cash flow to grow by 5% annually.
Required -
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?