CORPORATE VALUATION Dantzler Corporation is a fast-growing supplier of office pr
ID: 2788862 • Letter: C
Question
CORPORATE VALUATION
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 8% rate. Dantzler's WACC is 13%.
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 $162 million of debt and 17 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
Terminal value (TV) ( in case of constant growth rate)
TV3 = FCF4 / (Wacc - g)
g= growth rate = 8%
TV3 = 49 (1+0.08) / (0.13-0.08) = 1058.4
Value of firm is the present value of expected free cash flows and terminal value, discounted at the firm's weighted average cost of capital = $ 766.79 millions
Value of Equity = Value of firm - Value of debt
= 766.79 - 162
= $ 604.79 million
Number of shares outstanding = 17 million
Value per share = value of equity / number of shares outstanding
= 604.79/ 17 = $35.58
Year FCF Terminal value PVF @ 13% PV of cash flows 1 -15000000 0.885 -13275000.00 2 16000000 0.7831 12529600.00 3 49000000 0.6931 33961900.00 3 1058400000 0.6931 733577040.00 766793540.00 $766.79 millionsRelated Questions
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