Question
DOTA 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
DOTA 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 rate of 7% rate. DOTAs WACC is 13%. EXPLAIN WITH BA2 CALCULATOR!
(1) What is DOTA's horizon value? (Hint: Find the value of al free cash flows beyond
Year 3 discounted back to Year 3.)
(2) What is the firms value today?
(3) Suppose DOTA has $100million of debt and 10 million shares of stock outstanding.
What is your estimate of the current price per share?
Year 0 1 2 3 -$20 FCF($millions) $30 $40Step by Step Solution
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Authors: Greg Middleton
1st Edition
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