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 5% rate. Dantzler's WACC is 13%.

Year	0		1		2		3
	.......	.......	.......	.......	.......	.......	.......	.......
FCF ($ millions)	.......	.......	.......	.......	.......	.......	.......	......
			- $9		$35		$51

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.

1. 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

2. 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

3. Suppose Dantzler has $118 million of debt and 11 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

Corporate Valuation
Millions
FCF1	-9
FCF2	35
FCF3	51
g	5%
WACC	13%
Market value of debt	118
Common shares outstanding	11
		0	1	2	3	4
FCFs			-9	35	51	53.55
Horizon Value					669.375
Total FCFs		0	-9	35	720.375
PV		0	-7.96460177	27.4101339	499.2560107
Firm Value today		518.70	Millions
Market value of Equity		400.70	Millions
Price per Share		36.43