Question
*Please show formulas* Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years,
*Please show formulas*
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 4% rate. Dantzler's WACC is 13%.
| Year | 0 | 1 | 2 | 3 | ||||
| ....... | ....... | ....... | ....... | ....... | ....... | ....... | ....... | |
| FCF ($ millions) | ....... | ....... | ....... | ....... | ....... | ....... | ....... | ...... |
| - $14 | $18 | $40 | ||||||
What is Dantzler's horizon, or continuing, value?
What is the firm's value today?
Suppose Dantzler has $72 million of debt and 14 million shares of stock outstanding. What is your estimate of the current price per share?
| Corporate valuation | ||||||
| Dollars/shares in millions | ||||||
| FCF1 | -$14.00 | |||||
| FCF2 | $18.00 | |||||
| FCF3 | $40.00 | |||||
| Constant growth rate, gn | 4.00% | |||||
| WACC | 13.00% | |||||
| Market value of debt | $72.00 | |||||
| Common shares outstanding | 14 | |||||
| 0 | 1 | 2 | 3 | 4 | ||
| FCFs | -$14.00 | $18.00 | $40.00 | |||
| Horizon value | ||||||
| Total FCFs | ||||||
| PV of FCFs to investors | ||||||
| Firm value today | ||||||
| Market value of equity, MVEquity | ||||||
| Price per share, P0 | ||||||
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