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 6% rate. Dantzler's WACC is 13%.
Year | 0 | 1 | 2 | 3 | ||||
....... | ....... | ....... | ....... | ....... | ....... | ....... | ....... | |
....... | ....... | ....... | ....... | ....... | ....... | ....... | ...... | |
FCF ($ millions) | - $9 | $28 | $46 |
Horizon value = Free cash flow in year 4/(WACC – growth Rate)
= 46(1.06)/(13%-6%)
= $696.57 million
b.Value of firm is equal to present value of free cash flows
= -9/(1.13) + 28/(1.13)^2 + 46/(1.13)^3 + 696.57/(1.13)^3
= $528.60 million
c.Price per share = (528.60 million – 148 million)/26 million
= $14.64 per share
Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows...
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Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFS) during the next 3 years, after which FCF is expected to grow at a constant 8% rate. Dantzler's WACC is 10%. Year 2 FCF ($ millions) - $21 $ 10 $45 a. What is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to two decimal places....
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