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 11%, and it has $1,500,000 of debt at market value and $400,000 of preferred stock at its assumed market value.

The estimated free cash flows over the next 5 years, 2004 through 2008, are given below. Beyond 2008 to infinity, the firm expects its free cash flow to grow by 3% annually.

_____________________________ Year (t) Free cash flow (FCFt) 2004 $200,000 2005 $250,000 2006 $310,000 2007 $350,000 2008 $390,000 _____________________________ 

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?