User Account

All Pages

Free cash flow valuation

Assignment Help Finance Basics
Reference no: EM131866882

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 valuation 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, 2016 through 2020, are given below. Beyond 2020 to infinity, the firm expects its free cash flow to grow by 3% annually.

Year(t) Free Cash Flow(FCFt)

2016 $200,000

2017 250,000

2018 310,000

2019 350,000

2020 390,000

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?

Reference no: EM131866882

Questions Cloud

Determine the amount of income allocated to each partner : Net income for the current year was $50,000. Determine the amount of income allocated to each partner
What does the term shared leadership mean : What does the term shared leadership mean? What advantages or disadvantages do you see in this leadership approach?
Complete the payroll register : Dizzy Dan pays time and one-half for overtime, which is calculated on all hours worked in excess of 40. Required: Complete the payroll register
Access the national human services website : You are a human service worker who lives in a small town and you work at the WIC center. You have a neighbor who you see come to the center for services.
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
What are the basic rights of stockholder of a corporation : In the absence of restrictive provisions, what are the basic rights of stockholder's of a corporation? What factors influence the dividend policy of a company
Discuss the advantages of interpreting mixed methods data : Discuss the advantages and disadvantages of interpreting mixed methods data, and give examples of the possibility of bias affecting the results in this process.
Dividend-discount model predict colgate stock : What price does the? dividend-discount model predict Colgate stock should sell for? today?
Interest-bearing account earning six percent interest : If she places her grandmother's gift in an interest-bearing account earning six percent interest, how much money will she have when she graduates

Reviews

Write a Review

Finance Basics Questions & Answers

  Improving the efficiency of logistics

Falling prices for core computing components, rapid advancement in speech recognition technology and head-worn display products are fueling a phenomenal growth in the wearable computer market.

  What is the most fred should be willing to pay

What is the most Fred should be willing to pay for a share of Denhart if he can earn 10% on investments of similar risk?

  Discuss about an average collection period

Barney's Antique Shop has annual credit sales of $1,080,000 and an average collection period of 40 days. Assume a 360-day year.

  Non value-maximizing motives for mergers

Explain how agency problems may lead to non value-maximizing motives for mergers.

  How many shares would an investor end up

The company's stock is selling for $30 per share. The company had total earnings of $6,900,000 during the year. With 2,300,000 shares outstanding, earnings per share were $3. The firm has a P/E ratio of 10.

  Ethical cost allocations and price determination

Did Abby compute the cost of the Breeland Ltd. special order correctly before the weekend get-together? If not, how was her cost estimate and/or price determination flawed?

  How do we calculate the payback period for a proposed

how do we calculate the payback period for a proposed capital budgeting project? what are the main criticisms of the

  Examine the free cash flow to equity approach fcfe

mergers and acquisitions please respond to the followingdiscuss the concept of goodwill and the reason why balance

  The estimated long-term real growth rate of the economy is

assume that the consensus required rate of return on common stocks is 14 percent. in addition you read in fortune that

  Olympic sports has two issues of debt outstanding

Olympic Sports has two issues of debt outstanding. One is a 6% coupon bond with a face value of $28 million, a maturity of 15 years, and a yield to maturity of 7%. The coupons are paid annually. The other bond issue has a maturity of 20 years, with c..

  How do control activities relate to the accounting system

How do these control activities help protect a company against error, theft, and fraud?- How do control activities relate to the accounting system?

  What does the lower control limit tell us

What does the upper control limit of either a p, np, c, or u chart tell us about the process? What does the lower control limit tell us?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd