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 13%.

Year	0		1		2		3
	.......	.......	.......	.......	.......	.......	.......	.......
FCF ($ millions)	.......	.......	.......	.......	.......	.......	.......	......
			- $18		$14		$42

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.

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.

3 Suppose Dantzler has $84 million of debt and 34 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

Year	Cash flow	Cash flow	PV factor	Present Values
1		(18.00)	0.884956	(15.93)
2		14.00	0.783147	10.96
3		42.00	0.69305	29.11
3		636.00	0.69305	440.78
			Total PV	464.92
Current Cash flow	42.0000
Rate of return	13.00%
Growth Rate	6.00%
Horizon value	=Current Cash flow*(1+Growth rate)/(Rate of return-Growth Rate)
	'42*(1+6%)/(13%-6%)
	636
Firm value today	464.92
Debt	-84
Equity value	380.92
No of shares	34
Value per share	380.92/34
Value per share	11.20