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Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist
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 the public offering, managers at Nabor ave 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 15% and it has $1,900,000 of debt and $380,000 of preferred stock in terms of market value. The estimated free cash flows over the next five years, 2020 through 2024, are given, Beyond 2024to infinity, 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? a. The value of Nabor Industries' entire company is $ (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year (t) Free cash flow (FCF) 2020 $230,000 2021 $300,000 2022 $380,000 2023 $450,000 2024 $500,000 -
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