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 11%.
Year | 0 | 1 | 2 | 3 | ||||
....... | ....... | ....... | ....... | ....... | ....... | ....... | ....... | |
....... | ....... | ....... | ....... | ....... | ....... | ....... | ...... | |
FCF ($ millions) | - $25 | $24 | $57 |
WACC= | 11.00% | ||||||
Year | Previous year FCF | FCF growth rate | FCF current year | a. Horizon value | Total Value | Discount factor | Discounted value |
1 | 0 | 0.00% | -25 | -25 | 1.11 | -22.5225 | |
2 | -25 | 0.00% | 24 | 24 | 1.2321 | 19.47894 | |
3 | 24 | 0.00% | 57 | a. 1208.4 | 1265.4 | 1.367631 | 925.24957 |
Long term growth rate (given)= | 6.00% | b.Value of Enterprise = | Sum of discounted value = | 922.21 | |||
Where | |||||||
Total value = FCF + horizon value (only for last year) | |||||||
Horizon value = FCF current year 3 *(1+long term growth rate)/( WACC-long term growth rate) | |||||||
Discount factor=(1+ WACC)^corresponding period | |||||||
Discounted value=total value/discount factor |
c
Enterprise value = Equity value+ MV of debt |
925.24957 = Equity value+138.4 |
Equity value = 786.85 |
share price = equity value/number of shares |
share price = 786.85/13 |
share price = 60.53 |
Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows...
Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dantzler's WACC is 10%. Year 0 1 2 3 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ...... FCF ($ millions) - $20 $21 $43 What is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free...
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Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dantzler's WACC is 12%. Year 0 1 2 3 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ...... FCF ($ millions) - $25 $15 $42 What is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free...
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