Question

Dozier 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 7% rate. Dozier's weighted average cost of capital is WACC = 18%.

Year | |||

1 | 2 | 3 | |

Free cash flow ($ millions) | -$20 | $30 | $40 |

What is Dozier's horizon 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.

$ million

What is the current value of operations for Dozier? Do not round
intermediate calculations. Round your answer to two decimal
places.

$ million

Suppose Dozier has $10 million in marketable securities, $100 million in debt, and 10 million shares of stock. What is the intrinsic price per share? Do not round intermediate calculations. Round your answer to the nearest cent.

Answer #1

(a) | Horizon value = | FCF4/(Re-g) x 1/(1+Re)^3 | ||||

[(40x1.07)/(0.18-0.07)][1/(1.18^3)] | ||||||

236.8127 | ||||||

(b) | Year | FCF | PV factor @ 18% | PV of FCF | ||

1 | -20 | 0.847458 | -16.9492 | |||

2 | 30 | 0.718184 | 21.54553 | |||

3 | 40 | 0.608631 | 24.34523 | |||

28.94162 | ||||||

Value of firm = | 28.94162 + 236.8127 = | 265.7544 | ||||

(c ) | Value of firm = | 265.7544 | ||||

Less; | Value of Securities = | 10 | ||||

Less; | Value of debt = | 100 | ||||

Value of equity = | 155.7544 | |||||

No. of shares= | 10 | |||||

Value per share = | Value of equity/ No. of shares = | 15.57544 | ||||

Dozier 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. Dozier's weighted average cost of capital is WACC
= 13%.
Year
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2
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Free cash flow ($ millions)
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$30
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of all free cash flows beyond Year 3 discounted back to Year 3.)
Round your...

Dozier 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 9% rate. Dozier's weighted average cost of capital is WACC
= 16%.
Year
1
2
3
Free cash flow ($ millions)
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$30
$40
What is Dozier's terminal, or horizon, value? (Hint:
Find the value of all free cash flows beyond Year 3 discounted back
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Dozier Corporation is a fast-growing supplier of office
products. Analysts project the following free cash flows (FCFs)
during the next 3 years, after which FCF is expected to grow at a
constant 9% rate. Dozier's weighted average cost of capital is WACC
= 13%. Year 1 2 3 Free cash flow ($ millions) -$20 $30 $40 What is
Dozier's horizon value? (Hint: Find the value of all free cash
flows beyond Year 3 discounted back to Year 3.)
Round your...

Dozier 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 9% rate. Dozier's weighted average cost of capital is WACC
= 16%. Year 1 2 3 Free cash flow ($ millions) -$20 $30 $40 What is
Dozier's horizon value? (Hint: Find the value of all free cash
flows beyond Year 3 discounted back to Year 3.) Round your...

Dozier 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 10% rate. Dozier's weighted average cost of capital is
WACC = 18%.
Year
1
2
3
Free cash flow ($ millions)
-$20
$30
$40
What is Dozier's horizon value? (Hint: Find the value
of all free cash flows beyond Year 3 discounted back to Year 3.)
Enter your...

Dozier 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 10% rate. Dozier's weighted average cost of capital is
WACC = 13%. Year 1 2 3 Free cash flow ($ millions) -$20 $30 $40
What is Dozier's horizon value? (Hint: Find the value of all free
cash flows beyond Year 3 discounted back to Year 3.) Enter your...

Dozier 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 9% rate. Dozier's weighted average cost of capital is WACC
= 15%. Year 1 2 3 Free cash flow ($ millions) -$20 $30 $40
a) What is Dozier's horizon value? (Hint: Find the value of all
free cash flows beyond Year 3 discounted back to Year 3.) Enter...

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products. Analysts project the following free cash flows (FCFs)
during the next 3 years, after which FCF is expected to grow at a
constant 9% rate. Dozier's weighted average cost of capital is WACC
= 13%.
Year
1
2
3
Free cash flow ($ millions)
-$20
$30
$40
What is Dozier's terminal, or horizon, value? (Hint:
Find the value of all free cash flows beyond Year 3 discounted...

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