You have been tasked with determining a fair stock price for company X that will soon be going public for $22 per share. You are interested in investing in this company, but only if it is fairly priced (or undervalued). You have decided to use the free cash flow approach to determine the intrinsic price per share and have compiled the following data:

Free Cash Flow Data Other Data

Year (t) FCF Growth rate of FCF beyond year 4 = 5%

1 $645,000 Weighted average cost of capital = 11%

2 775,000 Market Value of all debt = $2,300,000

3 930,000 Number of common shares outstanding = 500,000

4 1,115,000 Value of non-operating assets = $1,000,000

a. What is the intrinsic price per share?

b. Based on the calculated intrinsic price and the offer price of $22 should you buy the stock and why/why not?

c. If the book value of equity is 10,000,000, what is the market value added of Company X?