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 $1,530,000 of 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,2020 through2024, 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 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? I need all parts answered

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter20: Hybrid Financing: Preferred Stock, Warrants, And Convertibles

Section: Chapter Questions

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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 15%, and it has $1,530,000
of 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,2020
through2024, 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 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?

I need all parts answered

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