Question

ellook Problem Walk-Through 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 8 % rate. Dozier's weighted average cost of capital is WACC 13 % . Year 2 3 Free cash flow ($ millions) - $20 $30 $40 a. What is Dozier's horizon value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. million $713.33 b. What is the current value of operations for Dozier? Do not round intermediate calculations. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answer to two decimal places. $ 531.49 million c. Suppose Dozier has $10 million in marketable securities, $100 million in debt, and 10 million shares of stock. What is the intrinsic price per share? Do not round intermediate calculations. Round your answer to the nearest cent. $ 42.15

Answer 1

a.

horizon value

=(40*(1+8%))/(13%-8%)

=864.00 million

b.

current value

=-20/(1+13%)^1+30/(1+13%)^2+40/(1+13%)^3+((40*(1+8%))/(13%-8%))/(1+13%)^3

=632.31 million

c.

intrinsic value per share

=(632.31+10-100)/10

=54.23

2)

EMC value of operations

=(500000*(1+4.8%))/(12%-4.8%)

=7277778

the above is answer..