eBook 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 $6\%$ rate. Dozier's weighted average cost of capital is WACC $=16\%.$

Year

$123$

Free cash flow $($millions of dollars$)-$$$20$ $$30$ $$40$

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 answer in millions. For example, an answer of $$10,550,000$ should be entered as $10\mathrm{.}55.$ Round your answer to two decimal places.

$

million

What is the current value of operations for Dozier? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $$10,550,000$ should be entered as $10\mathrm{.}55.$ Round your answer to two decimal places.

$

million

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.

$

per share