*756. 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 14%, and it has $1,710,000 of debt at market value and $340,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years, 1 through 5, are given in the table, (scroll down). After year 5, the firm expects its free cash flow to grow by 5% 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?

1555. Common stock valueVariable growth-Newman Manufacturing is considering a cash purchase of the stock of Grips Tool. During the year just completed, Grips earned $3.13 per share and paid cash dividends of $1.43 per share (D0=$1.43). Grips' earnings and dividends are expected to grow at 40% per year for the next 3 years, after which they are expected to grow 6% per year to infinity. What is the maximum price per share that Newman should pay for Grips if it has a required return of 11% on investments with risk characteristics similar to those of Grips?

Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (1) OLAN Free cash flow (FCF $200,000 $240,000 $320,000 $360,000 S400,000 4 5 Print Done