p7-16) Need help solving parts a through c

PART THREE Valuation of Securities Personal Finance Problem P7/16/Free cash flow valuation You are evaluating the potential purchase of a small business with no debt or preferred stock that is currently generating $42,500 of free cash flow (FCFo = $42,500). On the basis of a review of similar-risk invest- ment opportunities, you must earn an 18% rate of return on the proposed pur- chase. Because you are relatively uncertain about future cash flows, you decide to estimate the firm's value using several possible assumptions about the growth rate of cash flows. a. What is the firm's value if cash flows are expected to grow at an annual rate of 0% from now to infinity? b. What is the firm's value if cash flows are expected to grow at a constant annual rate of 7% from now to infinity? c. What is the firm's value if cash flows are expected to grow at an annual rate of 12% for the first 2 years, followed by a constant annual rate of 7% from year 3 to infinity? P7-17 Free cash flow valuation Nabor 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 Nabor 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%, and it has $1,500,000 of debt and $400,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5 years, 2020 through 2024, are given below. Beyond 2024 to infinity, the firm expects its free cash flow to grow by 3% annually. Year (t) Free cash flow (FCF,) 2020 $200,000 2021 250,000 202 310,000 2023 350,000 2024 390,000 a. Estimate the value of Nabor 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 Nabor Industries' common stock value. C. If the firm plans to issue 200,000 shares of common stock, what is its estimated value per share? Personal Finance Problem 27- 18 Using the free cash flow valuation model to price an IPO 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 con- cerned 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