CORPORATE VALUATION Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash...

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Finance

CORPORATE VALUATION
Dantzler Corporation is a fast-growing supplier of officeproducts. Analysts project the following free cash flows (FCFs)during the next 3 years, after which FCF is expected to grow at aconstant 5% rate. Dantzler's WACC is 10%.
Year 0 1 2 3
....... ....... ....... ....... ....... ....... ....... .......
....... ....... ....... ....... ....... ....... ....... ......
FCF ($ millions) - $12 $24 $48
What is Dantzler's horizon, or continuing, value?(Hint: Find the value of all free cash flows beyond Year 3discounted back to Year 3.) Round your answer to two decimalplaces. 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 twodecimal places. Enter your answer in millions. For example, ananswer of $13,550,000 should be entered as 13.55. Do not round yourintermediate calculations.
$ million
Suppose Dantzler has $94 million of debt and 23 million sharesof stock outstanding. What is your estimate of the current priceper share? Round your answer to two decimal places. Write out youranswer completely. For example, 0.00025 million should be enteredas 250.

Answer & Explanation Solved by verified expert

3.7 Ratings (705 Votes)

Part a Horizon or continuing value refers to the terminal value The terminal value is calculated as Terminal valueCash flow in year 31Growth rateWACCGrowth rate Free cash flow in year 348 Growth rate5 See Answer

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CORPORATE VALUATIONDantzler Corporation is a fast-growing supplier of officeproducts. Analysts project the following free cash flows (FCFs)during the next 3 years, after which FCF is expected to grow at aconstant 5% rate. Dantzler's WACC is 10%.Year0123...............................................................................................................FCF ($ millions)- $12$24$48What is Dantzler's horizon, or continuing, value?(Hint: Find the value of all free cash flows beyond Year 3discounted back to Year 3.) Round your answer to two decimalplaces. Enter your answer in millions. For example, an answer of$13,550,000 should be entered as 13.55.$ millionWhat is the firm's value today? Round your answer to twodecimal places. Enter your answer in millions. For example, ananswer of $13,550,000 should be entered as 13.55. Do not round yourintermediate calculations.$ millionSuppose Dantzler has $94 million of debt and 23 million sharesof stock outstanding. What is your estimate of the current priceper share? Round your answer to two decimal places. Write out youranswer completely. For example, 0.00025 million should be enteredas 250.

Year	0		1		2		3
	.......	.......	.......	.......	.......	.......	.......	.......
	.......	.......	.......	.......	.......	.......	.......	......
FCF ($ millions)			- $12		$24		$48