timated flows over the next 5 years, 2016 through 2020, are given below tree cash Beyond 2020 to infinity, the firm expects its free cash flow/ to grow by 3% annually. Year (r) 2016 Free cash flow (FCF $200,000 250,000 310,000 350,000 390,000 2018 2020 a. Estimate the value of Nabor Industries' entire company by using the free cash low valuation model. b. Use your finding in part a, along with the data provided above, to find Nabor In- dustries' common stock value. c. If the firm plans to issue 200,000 shares of common stock, what is its estimated value per share? Personal Finance Problem 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 con- cerned 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 com- piled are summarized in the following table. P7-17 Free cash flow Other data Year (r) FCF 2016 $ 700,000 Growth rate of FCF, beyond 20 19 to infinity 2% 2017 800,0001 weighted average cost of capital-8% 2018 2019 1,100,000 Market value of preferred stock S1,000,000 950,000 Market value of all debt $2,700,000 Number of shares of common stock outstanding -1,100,000 a. Use the free cash flow valuation model to estimate CoolTech's common stock b. Judging on the basis of your finding in part a and the stock's offering price, c. On further analysis, you find that the growth rate in FCF beyond 2019 will be value per share. should you buy the stock? 3% rather than 2%. What effect would this finding have on your responses in parts a and b? 5) P7-18 Book and liquidation value The balance sheet for Gallinas Industries s as follows