Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dantzler's WACC is 10%.
Year | 0 | 1 | 2 | 3 | ||||
....... | ....... | ....... | ....... | ....... | ....... | ....... | ....... | |
....... | ....... | ....... | ....... | ....... | ....... | ....... | ...... | |
FCF ($ millions) | - $20 | $21 | $43 |
a.
Horizon Value = 43(1.07)/(0.10 - 0.07)
Horizon Value = $1,533.67 million
b.
Market Value = -20/(1.10) + 21/(1.10)2 + (43 + 1,533.67)/(1.10)3
Market Value = $1,183.75 million
c.
Price per Share = (1,183.75 - 72.50)/23
Price per Share = $48.32
Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows...
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Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dantzler's WACC is 12%. Year 0 1 2 3 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ...... FCF ($ millions) - $25 $15 $42 What is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free...
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