Dozier Corporation is a fast-growing supplier of office
products. Analysts project the following free cash flows(FCFs)
during the next 4 years, after which FCF is expected to grow at a
constant 8% rate. Dozier's weighted average cost of capital is WACC
= 17%.
Year Free cash flow($ millions)
1 -$400
2 $500
3 $700
4 $900
Suppose Dozier has $500 million in marketable securities, $1,500
million in debt, and 80 million shares of stock. What is the
intrinsic price per share?
A) $43.79
B) $71.30
C) $68.54
D) $57.04
Value of Operations = -400/(1.17) + 500/(1.17)2 + 700/(1.17)3 + 900/(1.17)4 + 900(1.08)/(0.17 - 0.08)(1.17)4
Value of Operations = $6,704.14
Intrinsic Value = (6,704.14 - 500 - 1,500)/80
Intrinsic Value = $57.04
Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows(FCFs)...
5. Free Cash Flow Valuation Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dozier's weighted average cost of capital is WACC = 15%. Year 1 2 3 Free Cash Flow ($ millions) -$20 $30 $40 What is Dozier's horizon value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back...
Free Cash Flow Valuation Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dozier's weighted average cost of capital is WACC = 18%. Year 1 2 3 Free cash flow ($ millions) -$20 $30 $40 What is Dozier's horizon value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to...
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