CORPORATE VALUATION Dantzler Corporation is a fast-growing supplier of office pr
ID: 2793684 • 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 14%.
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 $89 million of debt and 35 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250.
Year 0 1 2 3 ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ...... FCF ($ millions) - $10 $27 $46Explanation / Answer
The horizon or the continuing value at the end of third year can be calculated as:
= 46*1.08/(0.14-0.08)
= 828 million
The value of firm today = -10/1.08 + 27/1.08^2 + (46+828)/1.08^3
= 707.7 million
Current value of stock = (707.7-89)/35
= 17.68
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