Using the free cash flow valuation model to price an IPOPersonal Finance ProblemAssume that you have an opportunity to buy the stock of CoolTech, Inc., an IPO being offered for $9.52 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, LOADING... Year (t)

2

3

4

FCF

$730.000

$840,000

$960,000

$1,040.000

Other data

Growth rate of FC, beyond year 4 = 5%

Weighted average cost of capital = 11%

Market value of all debt = $2,940,000

Market value of preferred stock = $1,180,000

Number of shares of common stock outstanding = 1,100,000