fx . C D E F G H 1 K 1 2 3 4 5 6 7 B 9 10 11 12 13 14 15 16 QUESTION 02: 60 Points Assume that you have an opportunity to buy the stock of CoolTech, Inc., an IPO being offered for $12.50 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 developed from a variety of data sources. The key values you have compiled are summarized in the following table. Year (t) ECE Other Data 2013 $750,000 Growth rate of FCF, beyond 2013 to infinity 2% 2014 835,000 Weighted average cost of capital 10.5% 2015 955,000 Market value of all debt $2,700,000 2016 1,200,000 Market value of preferred stock $1,000,000 No of shares of common stock outstanding = 1.100.000 a. Use the free cash flow 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? c. On further analysis, you find that the growth rate in FCF beyond 2016 will be 3% rather than 2%. What effect would this finding have on your responses in parts a and b? 17 18 19 20 21 22 23 24 25 26 27 28 QUESTION 02:40 Points Find the value of a bond maturing in 6 years, with a $1,000 par value and a coupon interest rate of 10% (5% paid semiannually) if the required return on similar-risk bonds is 14% annual interest (7% paid semiannually). 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57