(3) Bynum and Crumpton, a small jewelry manufacturer, has been successful and has enjoyed a positive growth trend. Now B&C is planning to go public with an issue of common stock, and it faces the problem of setting an appropriate price for the stock. The company and its investment banks believe that the proper procedure is to conduct a valuation and select several similar firms with publicly traded common stock and to make relevant comparisons. Several jewelry manufacturers are reasonably similar to B&C with respect to product mix, asset composition, and debt/equity proportions. Of these companies, Abercrombe Jewelers and Gunter Fashions are most similar. When analyzing the following data, assume that the most recent year has been reasonably "normal" in the sense that it was neither especially good nor especially bad in terms of sales, earnings, and free cash flows. Abercrombe is listed on the AMEX and Gunter on the NYSE, while B&C will be traded in the NASDAQ market. Company data Abercrombe Gunter B&C Shares outstanding 4 million 9 million 500,000 Price per share $38.00 $48.00 NA Earnings per share $2.20 $3.13 $2.60 Free cash flow per share $1.63 $2.54 $2.00 Book value per share $14.00 $23.00 $19.00 Total assets $91 million $257 million $11.5 million Total debt $35 million $50 million $2 million a. B&C is a closely held corporation with only 500,000 shares outstanding. Free cash flows have been low and in some years negative due to B&C's recent high sales growth rates, but as its expansion phase comes to an end, B&C's free cash flows should increase. B&C anticipates the following free cash flows over the next 5 years: