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 13%, and it has $2,170,000 of debt at market value and $430, 000 of preterred stock in terms of market value. The estimated tree cash flows over the next 5 years. 1 through 5. are given in the table. After year 5. the firm expects its free cash flow to arow by 5% 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 nans to issue 200 000

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 13%, and it has $2,170,000 of debt at market value and $430, 000 of preterred stock in terms of market value. The estimated tree cash flows over the next 5 years. 1 through 5. are given in the table. After year 5. the firm expects its free cash flow to arow by 5% 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 nans to issue 200 000

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter11: Venture Capital Valuation Methods

Section: Chapter Questions

Problem 3EP

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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 15 %, and it has $ 1,670,000 of debt at market value and $ 330,000 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, Year (t) Free cash flow (FCF) 2020 $230,000 2021 $260,000 2022 $330,000 2023 $370,000 2024 $440,000 Beyond 2024 to infinity, the firm expects its free cash flow to grow by 5% 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,…
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 13%, and it has $1,720,000 of debt at market value and $340,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years, 1 through 5, 1 230,0002 270,0003 330,0004 360,0005 420,000After year 5, the firm expects its free cash flow to grow by 3% 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…
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 12 %, and it has $3,060,000 of debt at market value and $610,000 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 6 % annually. Year (t) Free Cash Flow (FCF) 2020 $260,000 2021 $330,000 2022 $380,000 2023 $430,000 2024 $480,000 a. Estimate the value of Nabor Industries' entire company by using the free cash flow valuation model. b.…
Nabor Industries is considering going public but is unsure of a fair offering price for thecompany. 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 stockvalue. The firm’s CFO has gathered data for performing the valuation using the free cashflow 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 marketvalue. The estimated free cash flows over the next 5 years, 2013 through 2017, are givenbelow. Beyond 2017 to infinity, the firm expects its free cash flow to grow by 3% annually. Year Free Cash Flow (FCF) 2013 $200,000 2014 250,0002015 310,0002016 350,0002017 390,000(i) Estimate the value of Nabor Industries’ entire company by using the free cash flow valuation model. (ii) Use your finding in part i, along with the data provided above, to find Nabor…
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 $3,110,000 of debt at market value and $620,000 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, year (t) free cash flow 1 270,000 2 330,000 3 360,000 4 440,000 5 470,000 After year 5,the firm expects its free cash flow to grow by 5%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'…
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 15%, and it has $1,530,000of debt at market value and $310,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years,2020through2024, are given in the table, Year (t) Free cash flow(FCF) 2020 $230,000 2021 $310,000 2022 $340,000 2023 $370,000 2024 $420,000 Beyond 2024 to infinity, 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…
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, 2013 through 2017, are given below. Beyond 2017 to infinity, the firm expects its free cash flow to grow by 3% annually. Year Free cash flow (FCF) 2013 $200,000 2014 $250,000 2015 $310,000 2016 $350,000 2017 $390,000 (i) Estimate the value of Nabor Industries’ entire company by using the free cash flow valuation model. (ii) Use your finding in i, along with the data provided above, to find Nabor…
Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investmentbanker to assist in making the public offering, managers at Nabor have decidedto 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 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: Year Free Cash Flow 2022 $200,000 2023 $250,000 2024 $310,000 2025 $350,000 2026 $390,000 Estimate the value of Nabor Industries’ entire company by using the free cashflow valuation model. ( please solve this one manually) Use your finding in part a, along with the data provided above, to find NaborIndustries’ common stock value. If the firm plans to issue 200,000…
Ignatius Industries is considering going public but is still determining a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Ignatius have decided to make their own estimate of the firm’s common stock value. The firm’s CFO has gathered data for valuating using the free cash flow valuation model. The firm’s weighted average cost of capital is 12%, and it has $1,500,000 of debt at market value and $550,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 year, 2024 through 2028, are given below. Beyond 2028 to infinity, the firm expects its free cash flow to grow by 3% annually. Year FCF 2024 $250,000 2025 325,000 2026 810,000 2027 950,000 2028 1,690,000 Estimate the value of Ignatius Industries’ entire company by using the free cash flow valuation model. Use your finding in part a, along with the data provided…
Question content area top Part 1 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 13%, and it has $3,010,000 of debt at market value and $600,000 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, 1 300,0002 340,0003 420,0004 480,0005 560,000 After year 5, the firm expects its free cash flow to grow by 6% 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…
Free cash flow valuation You are evaluating the potential purchase of a small business with no debt or preferred stock that is currently generating $42,500 of free cash flow (FCF0= $42,500). On the basis of a review of similar-risk investment opportunities, you must earn a(n) 16% rate of return on the proposed purchase. Because you are relatively uncertain about future cash flows, you decide to estimate the firm's value using several possible assumptions about the growth rate of cash flows. a. What is the firm's value if cash flows are expected to grow at an annual rate of 0% from now to infinity? b. What is the firm's value if cash flows are expected to grow at a constant annual rate of 7%from now to infinity? c. What is the firm's value if cash flows are expected to grow at an annual rate of 12% for the first 2 years, followed by a constant annual rate of 7% from year 3 to infinity?