Dantzler Corporation is a fast-growing supplier of office products. Analysts pro

Question

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 15%. Year 0 1 2 3 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ...... FCF ($ millions) - $25 $22 $48 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.) Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. $ million What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round your intermediate calculations. $ million Suppose Dantzler has $178 million of debt and 21 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250.

Explanation / Answer

Year FCF 1 25 $ Million 2 22 $ Million 3 48 $ Million 4 50.88 $ Million 5 53.93 $ Million 6 57.17 $ Million and so on FCF after 3 year regular at 6% Then upto perpetuity Wacc = 15% Total cash flow from year 4 to end is FCF/(Wacc-g) PV Factor @ 15% PV 4th to end 533.3333 $ million 0.571753 304.9351 1 25 $ million 0.869565 21.73913 $ million 2 22 $ million 0.756144 16.63516 $ million 3 48 $ million 0.657516 31.56078 $ million Total 374.8701 $ million less Debt 178 $ million Equity 196.8701 $ million shares 21 million Current Value of share = 9.374768 $

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