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 FCF ($ millions) 0 $ $ 1 million - $14 2 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. million $30 X Open spreadsheet a. 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. 3 $47 b. 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. c. Suppose Dantzler has $156 million of debt and 6 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250.
Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFS) during the next 3 years, after which FCF is expected to grow at a constant 8% rate. Dantzler's WACC is 14%. Year FCF ($ millions) 0 $ $ 1 million - $14 2 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. million $30 X Open spreadsheet a. 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. 3 $47 b. 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. c. Suppose Dantzler has $156 million of debt and 6 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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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100%
 **million**
2. **Firm Valuation Today:**
- Determine the present value of the firm, rounded to two decimal places.
- Provide your answer in millions.
 **million**
3. **Current Price Per Share Estimation:**
- Given Dantzler's $156 million in debt and 6 million shares of stock outstanding, estimate the current stock price per share.
- Ensure your answer is fully expressed and rounded to two decimal places.
 **dollars**
To conduct your analysis, access the Excel spreadsheet linked below and follow the guided instructions:
 **Open spreadsheet**
**Note:** Ensure accuracy in intermediate calculations to avoid rounding errors in final results.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F37e2f913-30b2-4c8c-98d5-339163057ff1%2F1a27a6fb-87af-4e52-8770-7c2b1a7e5661%2F476jqpe_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Dantzler Corporation Valuation Analysis**
Dantzler Corporation is a fast-growing supplier of office products. Analysts anticipate the following free cash flows (FCFs) over the next three years, after which FCF is projected to grow steadily at an 8% annual rate. Dantzler's Weighted Average Cost of Capital (WACC) is 14%.
**Free Cash Flow Overview**
- **Year 0:** Initial
- **Year 1:** $14 million
- **Year 2:** $30 million
- **Year 3:** $47 million
**Analytic Tasks**
Using the data collected in the provided Microsoft Excel Online file, perform the necessary analyses to address the following questions:
1. **Horizon or Continuing Value:**
- Calculate the value of all free cash flows that extend beyond Year 3, discounted back to the end of Year 3.
- Round your answer to two decimal places and present it in millions.
 **million**
2. **Firm Valuation Today:**
- Determine the present value of the firm, rounded to two decimal places.
- Provide your answer in millions.
 **million**
3. **Current Price Per Share Estimation:**
- Given Dantzler's $156 million in debt and 6 million shares of stock outstanding, estimate the current stock price per share.
- Ensure your answer is fully expressed and rounded to two decimal places.
 **dollars**
To conduct your analysis, access the Excel spreadsheet linked below and follow the guided instructions:
 **Open spreadsheet**
**Note:** Ensure accuracy in intermediate calculations to avoid rounding errors in final results.
Transcribed Image Text:# Corporate Valuation Spreadsheet
This spreadsheet outlines the process of corporate valuation using free cash flow (FCF) analysis. The data is presented in a tabular format with corresponding calculations.
### Key Definitions
- **FCF (Free Cash Flow)**: Cash generated by the company after accounting for capital expenditures, given in millions.
- **Constant Growth Rate (gₙ)**: The expected rate at which FCF will grow indefinitely.
- **WACC (Weighted Average Cost of Capital)**: The average rate of return a company is expected to pay its security holders to finance its assets.
- **Market Value of Debt**: The total value of a company's debt.
- **Common Shares Outstanding**: The total number of shares currently held by all shareholders.
### Data and Calculations
1. **Free Cash Flows (FCFs) in Millions:**
- Year 1: -$14.00
- Year 2: $30.00
- Year 3: $47.00
2. **Constant Growth Rate (gₙ)**: 8.00%
3. **Weighted Average Cost of Capital (WACC)**: 14.00%
4. **Market Value of Debt**: $156.00 million
5. **Common Shares Outstanding**: 6
### Calculations
- **Horizon Value**: Represents the value of cash flows beyond the forecast period.
- **Total FCFs**: Cumulative value of projected free cash flows, including the horizon value.
- **Present Value (PV) of FCFs**: The discounted value of future free cash flows to investors, applying WACC as the discount rate.
- **Firm Value Today**: Calculated by summing the present values of projected FCFs and adjusting for debt.
- **Market Value of Equity (MVₑ) and Price per Share (P₀)**: Determined by subtracting market value of debt from firm value and dividing by the number of shares.
### Graphical Representations
- **Bar Graphs**:
- Represent the FCFs over the projected years (1 to 3) and horizon value for year 4.
- PV of FCFs for the respective years is depicted in blue for investors' insight.
### Calculative Details
- The formulas and specific calculations are not filled in (indicated as #N/A) in the `Formulas
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