20. Using the Free Cash Flow Valuation Model to price an IPO: Assume you have the opportunity to buy the stock of Cool Tech, Inc. an IPO being offered for $9.50 per share. Although you are interested in owning the company, you are concerned about whether it is fairly priced. To determine the value of the shares you have have been able to obtain from various sources. Financial Data Developed: A. Year 1 2 Free Cash Flow $425,000 $650,000 $700,000 $800,000 Growth rate after year 4: 4% WACC: 10% Value of Debt: $2,500,000 3 4 Value of Preferred stock: $650,000 Number of Outstanding Shares: 650,000 Using Free Cash Flow model estimate the fair value of the firm's common stock and if you would purchase it? Value Purchase A. $ 10.59 No B. $ 9.35 No C. $ 12.79 Yes D. $ 10.59 Yes E. S 12.79 No