Suppose you work as a security analyst for the WINRE Retirement Pension Fund. Your fund is offered TechRevolution IPO shares at $12.50 per stock. Your funds manager is very interested in this IPO, but at the same time, he is concerned about the IPOs valuation, so he asked you to determine the fundamental value of the firms stock price. Using various sources, you gathered the following information about the firm, TechRevolution:

Year	Free cash flow (forecasted), $	Other data
2017	700,000	FCF growth rate (2021 to ) = 2%
2018	800,000	Weighted average cost of capital = 8%
2019	950,000	Market value of companys debt = $2,700,000
2020	1,100,000	Market value of preferred stock = $1,000,000
		Number of common shares outstanding (with IPO) = 1,100,000

Use the free cash flow valuation technique to estimate the companys price per share:

Find FCF for the 2021-infinity period

Find PV of FCFs (see table below)

Find the companys value (sum of PV of FCF)

Find the value of common stock = Company value - Debt - Preferred stock

Find the price of common stock=Common stock value/no. of common shares

Year	Free cash flow (forecasts), $	t		PV of FCF (at 8% discount rate)
2017	$ 700,000	1
2018	$ 800,000	2
2019	$ 950,000	3
2020	$ 1,100,000	4
2021-	$	4
Company value
	Value of common stock
	Common share price