Problem 7-18 Free Cash Flow Valuation Dozier Corporation is a fast-growing supplier of office products. Analysts...

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Problem 7-18 Free Cash Flow Valuation Dozier Corporation is a fast-growing supplier of office products. Analysts project the b. What is the current value of operations for Dozier? Do not round intermediate calculations. Round your answer to two decim

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Answer 1

Answer #1

	WACC=	16.00%
Year	Previous year FCF	FCF growth rate	FCF current year	Horizon value	Total Value	Discount factor	Discounted value
1	0	0.00%	-20		-20	1.16	-17.2414
2	-20	0.00%	30		30	1.3456	22.29489
3	30	0.00%	40	a. 540	580	1.560896	371.58145
	Long term growth rate (given)=	8.00%			*b. Value of Enterprise =*	*Sum of discounted value =*	376.63



Where
Total value = FCF + horizon value (only for last year)
Horizon value = FCF current year 3 *(1+long term growth rate)/( WACC-long term growth rate)
Discount factor=(1+ WACC)^corresponding period
Discounted value=total value/discount factor

c.

Enterprise value = Equity value+ MV of debt

- Cash & Cash Equivalents

376.63 = Equity value+100-10

Equity value = 286.63

share price = equity value/number of shares

share price = 286.63/10

share price = 28.66

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Answer 2

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