Personal Finance Problem LG 5 Using the free cash flow valuation model to price an IPO Assume that you have an opportunity to buy the stock of CoolTech Inc., an IPO being offered for $12.50 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 accumulated from a variety of data sources. The key values you have compiled are summarized in the following table. P7-18 Free cash flow Year (t)FCF Other data Growth rate of FCF, beyond 2023 to infinity weighted average cost of capital Market value of all debt 2% 2020 $ 700,000 800,000 950,000 2021 8% 2022 -$2,700,000 2023 1,100,000 Market value of preferred stock s1.000.000 Number of shares of common stock outstanding 1,100,000 a. Use the free cash low valuation model to estimate CoolTech's b. Judging by your finding in part a and the stock s offering price, should you c. On further analysis, you find that the growth rate of FCF beyond 2023 will common stock value per share. buy the stock? be 3% rather than 2%, what effect would this finding have on your responses in parts a and b