Roban Corporation 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, mangers 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 12%, and it has $1,400,000 of debt at market value and $500,000 of preferred stock at its assumed market value. The estimated free cash flows over the next five years, 2011 through 2015, are given below. Beyond 2015, the firm expects its annual free cash flow to grow by 4% indefinitely.2011-$250,000, 2012 - $290,000, 2013 - $320,000, 2014 - $360,000, 2015 - $400,000 a. Estimate the value of Roban Corps entire company by using the free cash flow approach.
b. Use your answer to part a, along with the previous data, to find Roban Corps common stock value.
c. If the firm plans to issue 220,000 shares of common stock, then what is its estimated value per share?