Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.25 a share at the end of the
You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $2.25 a share at the end of the year (D1 $2.25) and has a beta of 0.9. The risk-free rate is 6.0%, and the market risk premium is 5.0%. Justus currently sells for $29.00 a share, and its dividend is expected to grow at some constant rate, g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is 3?) Do not round intermediate calculations. Round your answer to the nearest cent. 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 6% rate. Dantzler's WACC is 14%. Year 0 1 2 3 $47 FCF ($ millions) - $14 $33 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. $ 622.75 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. $ 234.70 million c. Suppose Dantzler has $174 million of debt and 6 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 intermediate calculations. Round your answer to the nearest cent. $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started