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IPO being offered for $28.46 a share . Apply the free cash flow valuation model to the firms data listed .

Free cash flow

2020 740,000. Growth rate of FCF , beyond 2023 :6%

2021 860,000. Weighted average cost capital 8%

2022 990,000. Market value of all debts 8,940,000

2023. 1,070,000. Market value preferred stock 3,570,000

Number shares 1,100,000


A. Using the free flow valuation model .. estimate common stock value per share . The value is ?

B. Should a person buy the stock based on part A

C. The growth rate in FCF beyond 2023 is 7% instead 6%. What affect would the findings on responses in part A and B ?

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