Using the free cash flow valuation model to price an IPO: assume that it is the end of year 2015 and you have an opportunity to buy the stock of CoolTech inc. an IPO being offered for $17.98 per share. Although you are very much interested in owning the company, you are concerned about whether its fairly priced. To determine the value of the shares, you have decided to apply the FCF valuation model to the firms financial data that youve developed from a variety of data sources. (info given on data table)

a) use the FCF valuation model to estimate CoolTechs common stock value per share.

b) judging on the basis of your finding in part a and the stocks offering price, should you buy the stock?

c) on further analysis, you find that the growth rate in FCF beyond 2019 will be 6% rather than 5%. What effect would this finding have on your responses in part a and part b?

Homework: Module 6: Chapter 7 Save Score: 0 of 5 pts HW Score: 62.5%, 25 of 40 pts P7-17 (similar to) Question Help * Using the free cash flow valuation model to price an IPO Personal Finance Probilem Assume that it is the end of year 2015 and you have an opportunity to buy the stock of CoofTech, Inc, an IPO being offered for $17 98 per share. Although you are very much interested in owning the oompany, you are conoemed about whether ia is fairly prioed. To determine the value of the shares, you have decided to apply the free cash flow valuation model to the ferm's financial data that you/'ve developed from a variety of data sources. The key values you have compiled are summarizned in the following table, EE a Use the free cash fow valuation model to estimate CoolTech's common stock value per share. b. Judging on the basis of your finding in part a and the stock's offering price, should you buy the stock? IOnAte analysis, you fird tat te growth rate n FOF beyond 2019wilbeesterhan 5%, what otet would tis firdng have on your responses n parts a and b? a. The value of CoolTech's entire company is (Round to the nearest dollar) O Dats Table Clck on the loon located on the top-tight comer of the data table below in order to oopy its contents into a spreadsheet) cash flowother Other data FCF 2016 2017 2018 2019 $680.000 $810.000 940,000 | Growth rate of FCF, beyond 2019 to infaty . 5% | Weighted average cost of capital-a% Market value of all debt $6,080,000 $1,070,000 Market value of prefered stock $2,430,000 Number of shares of common stock to be issued 1,100,000 Print Done Enter your answer in the answer box and then click Check