Free cash flow valuation Nabor Industries is considering going public but is unsure of a...
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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 11%, and it has $2,940,000 of debt at market value and $590,000 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, E. Beyond 2024 to infinity, the firm expects its free cash flow to grow by 5% annually. a. The value of Nabor Industries' entire company is $| (Round to the nearest dollar.) b. The value of Nabor Industries' common stock is $. (Round to the nearest dollar.) c. If the firm plans to issue 200,000 shares of common stock, the estimated value per share is $ (Round to the nearest cent.) Data Table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (t) 2020 2021 2022 2023 2024 Free cash flow (FCF) $240,000 $270,000 $320,000 $400,000 $450,000
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