Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows...

Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows during the next 3 years, after which FCF is expected to grow at a constant 7.40% rate. Dozier's WACC is 11.40%.

Year	0	1	2	3
FCF ($ millions)		10	20	30

a. What is Dozier's horizon, or continuing, value?

b. What is the firm's value today?

c. Suppose Dozier has $200 million of debt and 100 million shares of stock outstanding. What is your estimate of the current price per share?

Expert Solution

a.

Horizon Value = 30(1.074)/(0.1140 - 0.0740)

Horizon Value = $805.50 million

b.

Firm Value = 10/(1.1140) + 20/(1.1140)² + (30 + 805.50)/(1.1140)³

Firm Value = $629.45 million

c.

Share Price = (629.45 - 200)/100

Share Price = $62.95

jeff jeffy answered 2 years ago

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Dozier Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows...

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