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 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 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 $178 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

Statement showing vale of firm today and horizon value

Year	FCF	PVIF @ 15%	Present value
1	-25	0.8696	-21.74
2	22	0.7561	16.64
3	48	0.6575	31.56
Horizon value = FCF4/Ke-g =FCF3(1+g)/Ke-g) =48(1.06)/15%-6% =50.88/9%	565.33	0.6575	371.71
Present value of firm			398.17

Statement showing value per share

Particulars	Amount
Present value of firm	398.17
Less: value of debt	178
Value of equity	220.17
No of shares	21
Price per share	10.48