Question

is expected to grow at a constant 4% rate. Dantzler's WACC is 11%. Year FCF ($ millions) $11 $34 $56 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.) Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round intermediate calculations. Round your answer to two decimal places. million b. What is the firm's market value today? Assume that Dantzler has zero non-operating assets. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round intermediate calculations. Round your answer to two decimal places. million c. Suppose Dantzler has $117 million of debt and 36 million shares of stock outstanding. What is your estimate of the current price per share? Write out your answer completely. For example, 0.00025 million should be entered as 250. Do not round 10025 million should be entered as 250. Do not round intermediate calculations. Round your answer to the nearest cent.

Answer 1

Year 1 Cash flows pv @ 11% $11.00 0.90090 $34.00 0.81162 $56.00 0.73119 $832.00 (56*1.04)/(0.11-0.04) 0.73119 Present value of future cash flows ( value of the firm ] Present value -$9.91 $27.60 $40.95 $608.35 $666.98 value of firm at year 3 million Horizon value = $832.00 million Value today = $666.98 million value of the firm = less: debt = value of equity = $667 $117.0 $549.98 million share price = $15.28 ( 549.98 - 36 ]