Free cash flow valuation Nassif Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public offering, managers at Nassif have decided to make their own estimate of the firm's common stock value. The firm's CFO has gathered data for performing the valuation using the free cash flow valuation model.

The firm's weighted average cost of capital is 11 percent, and it has US$1,500,000 of debt at market value and US$400,000 of preferred stock at its assumed market value. The estimated free cash flows over the next 5 years, 2013 through 2017, are given below. Beyond 2017 to infinity, the firm expects its free cash flow to grow by 3 percent annually.

Year (t)................Free cash flow (FCFt)

2013..............................US$200,000

2014....................................250,000

2015....................................310,000

2016....................................350,000

2017....................................390,000

a. Estimate the value of Nassif Industries' entire company by using the free cash flow valuation model.

b. Use your finding in part a, along with the data provided above, to find Nassif Industries' common stock value.

c. If the firm plans to issue 200,000 shares of common stock, what is its estimated value per share?