9. Using the free cash flow valuation model to price an IPO Personal Finance Problem Assume that it is the end of year 2015 and you have an opportunity to buy the stock of CoolTech, Inc., an IPO being offered for $13.08 per share. Although you are very much interested in owning the company, you are concerned about whether it is fairly priced. To determine the value of the shares, you have decided to apply the free cash flow valuation model to the firm's financial data that you've developed from a variety of data sources. The key values you have compiled are summarized in the following table, 1 a. Use the free cash flow valuation model to estimate CoolTech's common stock value per share b. Judging on the basis of your finding in part a and the stock's offering price, should you buy the stock? c. On further analysis, you find that the growth rate in FCF beyond 2019 will be 7% rather than 6%. What effect would this finding have on your responses in parts a and b? a. The value of CoolTech's entire company is $ (Round to the nearest dollar.) The value per share of CoolTech's common stock is $ (Round to the nearest cent.) b. On the basis of your finding in part a and the stock's offering price, should you buy the stock? (Select the best answer below.) 0 C. If the growth rate in FCF beyond 2019 will be 7% , the value of CoolTech's entire company will be $ (Round to the nearest dollar.) The value per share of CoolTech's common stock is $ On the basis of your finding in part c and the stock's offering price, should you buy the stock? (Select the best answer . (Round to the nearest cent.) below.) O A. Yes B. No 1: Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Free cash flow Other data Growth rate of FCF. beyond 2019 to infinity= 6% Weighted average cost of capital = 12% Market value of all debt = $2,820,000 Market value of preferred stock = $1,130,000 Number of shares of common stock to be issued = 1,100,000 FCF Year (t) 2016 2017 2018 2019 $740,000 $850,000 $940,000 $1,020,000 | | | |