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, managers at Roban...

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, managers at Roban decide to make their own estimate of the fi rm’s common stock value. The fi rm’s chief fi nancial offi cer gathered the following data for performing the valuation using the free cash fl ow valuation model. The fi rm’s weighted average cost of capital is 12 percent. 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 fl ows over the next fi ve years, 2010 through 2014, are given below. Beyond 2014 to infi nity, the fi rm expects its free cash fl ow to grow by 4 percent annually. Year Free Cash Flow 2010 $250,000 2011 290,000 2012 320,000 2013 360,000 2014 400,000 a. Estimate the value of Roban Corporation’s entire company by using the free cash fl ow approach. b. Use your fi nding in part (a), along with the data provided above, to fi nd Roban Corporation’s common stock value. c. If the fi rm plans to issue 220,000 shares of common stock, what is its estimated value per share?