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 7% rate. Dantzler's WACC is 14%.

Year | 0 | 1 | 2 | 3 | ||||

....... | ....... | ....... | ....... | ....... | ....... | ....... | ....... | |

....... | ....... | ....... | ....... | ....... | ....... | ....... | ...... | |

FCF ($ millions) | - $6 | $25 | $59 |

- 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 $195 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.

Answer #1

Answer a.

FCF1 = -$6 million

FCF2 = $25 million

FCF3 = $59 million

Growth Rate = 7%

FCF4 = FCF3 * (1 + Growth Rate)

FCF4 = $59 million * 1.07

FCF4 = $63.13 million

Horizon Value = FCF4 / (WACC - Growth Rate)

Horizon Value = $63.13 million / (0.14 - 0.07)

Horizon Value = $63.13 million / 0.07

Horizon Value = $901.86 million

Answer b.

Value of Firm = -$6 million / 1.14 + $25 million / 1.14^2 + $59
million / 1.14^3 + $901.86 million / 1.14^3

Value of Firm = $662.53 million

Answer c.

Value of Equity = Value of Firm - Value of Debt

Value of Equity = $662.53 million - $195.00 million

Value of Equity = $467.53 million

Price per share = Value of Equity / Number of shares
outstanding

Price per share = $467.53 million / 21.00 million

Price per share = $22.26

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 12%.
Year
0
1
2
3
.......
.......
.......
.......
.......
.......
.......
.......
FCF ($ millions)
.......
.......
.......
.......
.......
.......
.......
......
- $8
$18
$58
What is Dantzler's horizon, or continuing, value?
(Hint: Find the value of all free...

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 4% rate. Dantzler's WACC is 16%.
Year
0
1
2
3
..
FCF ($ millions)
- $19
$15
$50
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...

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%.
Year 0 1 2 3 ....... ....... ....... ....... ....... .......
....... ....... FCF ($ millions) ....... ....... ....... .......
....... ....... ....... ...... - $7 $14 $52
Open spreadsheet What is Dantzler's horizon, or continuing,
value? (Hint: Find the value of...

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...

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%.
Year
0
1
2
3
.......
.......
.......
.......
.......
.......
.......
.......
FCF ($ millions)
.......
.......
.......
.......
.......
.......
.......
......
- $8
$23
$42
What is Dantzler's horizon, or continuing, value?
(Hint: Find the value of all free...

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...

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 7% rate. Dantzler's WACC is 11%. Year 0 1 2 3 .......
....... ....... ....... ....... ....... ....... ....... .......
....... ....... ....... ....... ....... ....... ...... FCF ($
millions) - $23 $17 $46 a.What is Dantzler's horizon, or
continuing, value? (Hint: Find the value of all free...

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 4% rate. Dantzler's WACC is 11%. Year 0 1 2 3 .......
....... ....... ....... ....... ....... ....... ....... .......
....... ....... ....... ....... ....... ....... ...... FCF ($
millions) - $13 $15 $46 What is Dantzler's horizon, or continuing,
value? (Hint: Find the value of all free...

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 10%.
Year
0
1
2
3
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
......
FCF ($ millions)
- $23
$27
$38
What is Dantzler's horizon, or continuing, value?
(Hint: Find the value of all free cash flows...

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 7% rate. Dantzler's WACC is 10%.
Year
0
1
2
3
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
.......
......
FCF ($ millions)
- $16
$13
$43
What is Dantzler's horizon, or continuing, value?
(Hint: Find the value of all free...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 14 minutes ago

asked 19 minutes ago

asked 22 minutes ago

asked 23 minutes ago

asked 32 minutes ago

asked 40 minutes ago

asked 49 minutes ago

asked 49 minutes ago

asked 54 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago