70.2K

Verified Solution

Link Copied!

Free cash flow valuationNabor 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 %12%,

and it has

$ 2 comma 040 comma 000$2,040,000

of debt at market value and

$ 410 comma 000$410,000

of preferred stock in terms of market value. The estimated free cash flows over the next 5 years,

20202020

through

20242024,

are given in the table,

LOADING...

. Beyond

20242024

to infinity, the firm expects its free cash flow to grow by

3 %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 the firm plans to issue

200 comma 000200,000

shares of common stock, what is its estimated value per share?

a.The value of Nabor Industries' entire company is

$

(Round to the nearest dollar.)

b.Use your finding in part

a., along with the data in the table, to find Nabor Industries' common stock value.

c.The value per share of common stock is equal to the total value divided by the number of shares outstanding =

Answer & Explanation Solved by verified expert

See Answer