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 13%. HII Year 1 FCF ($ millions) $18 $33 $43 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.) Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round intermediate calculations. Round your answer to two decimal places. $ 716.67 million b. What is the firm's market value today? Assume that Dantzler has zero non-operating assets. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round intermediate calculations. Round your answer to two decimal places. %24 O million 536.40 c. Suppose Dantzler has $109 million of debt and 11 million shares of stock outstanding. What is your estimate of the current price per share? Write out your answer completely. For example, 0.00025 million should be entered as 250. Do not round intermediate calculations. Round your answer to the nearest cent. 24 38.85
Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFS) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dantzler's WACC is 13%. HII Year 1 FCF ($ millions) $18 $33 $43 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.) Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round intermediate calculations. Round your answer to two decimal places. $ 716.67 million b. What is the firm's market value today? Assume that Dantzler has zero non-operating assets. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round intermediate calculations. Round your answer to two decimal places. %24 O million 536.40 c. Suppose Dantzler has $109 million of debt and 11 million shares of stock outstanding. What is your estimate of the current price per share? Write out your answer completely. For example, 0.00025 million should be entered as 250. Do not round intermediate calculations. Round your answer to the nearest cent. 24 38.85
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
Related questions
Question
11) see picture, can not get right answer
Transcribed Image Text:**Dantzler Corporation: Valuation Analysis**
Dantzler Corporation is a rapidly expanding supplier of office products. Analysts have projected Free Cash Flows (FCFs) for the next three years. The FCF is anticipated to grow at a steady rate of 7% beyond this period. The company's Weighted Average Cost of Capital (WACC) is 13%.
### Yearly Free Cash Flows
- **Year 0:** N/A
- **Year 1:** -$18 million
- **Year 2:** $33 million
- **Year 3:** $43 million
### Questions and Answers:
**a. What is Dantzler's horizon, or continuing, value?**
To determine the horizon value, calculate the value of all future FCFs beyond Year 3, discounted back to Year 3.
- Horizon value: **$716.67 million**
**b. What is the firm's market value today?**
Assuming Dantzler has no non-operating assets, the market value is determined by current and forecasted free cash flows.
- Market value: **$536.40 million**
**c. Estimate the current price per share.**
Dantzler has $109 million of debt and 11 million shares outstanding. The current share price is based on the market value and the number of shares.
- Price per share: **$38.85**
### Diagram Explanation:
The diagram above illustrates the timeline of free cash flows over a three-year period. Each year's FCF is plotted, with negative flows in Year 1 and positive flows in Year 2 and 3, demonstrating the projected cash inflows and outflows.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education