Question

Asked Nov 21, 2019

11 views

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 11%.

Year | 0 | 1 | 2 | 3 |

....... | ....... | ....... | ....... | ....... |

FCF ($ millions) | ....... | ....... | ....... | ....... |

-$19 | $26 | $35 |

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.

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 $181 million of debt and 31 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.

Step 1

a)

The below expression can be used to calculate horizon value:

Step 2

Substitute $35 million for free cash flow in year 3, 8% for *g* and 11% for *WACC* in the above formula,

Step 3

b.

The firm value can be calculated with ...

Tagged in

Q: On August 10, a credit card account had a balance of $335. A purchase of $52 was made on August 15, ...

A: The average daily balance can be calculated by dividing the number of days from the sum amount owed ...

Q: I am currently working on some financial problems and accidentally asked more questions than permitt...

A: To calculate the expected return, first the weights of each stock in the portfolio is calculated as ...

Q: Micheal finds himself ia panic with a tax deadline coming up. Along with his wife they have a income...

A: Given that the combined income is $60000, interest earned is $1200, investment amount in the tax def...

Q: A mining company in South Africa has discovered a new gold vein in a mountain 150 kilometers north o...

A: With the given values on the initial cash outflows and the future cash inflows we can determine the ...

Q: Consider an all-equity firm that is contemplating going into debt. The market value of equity is cal...

A: The formula to calculate WACC is as follows:

Q: You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. Yo...

A: Calculation of Change in NWC at the end of Year 1:The change in NWC at the end of year 1 is $11,250....

Q: Answer need for part 3) only. Thank you! ABC Trading wants to raise equity to fund an acquisition of...

A: 3)Market Value of the Firm in (a) (ignoring information effects):Price of Stock = $60Outstanding Sha...

Q: A Forwand contracts have no defalt risk B Futures contracts roquire an initial margin requirement be...

A: In short position, for future contract if the price of the contract raises, the seller become obliga...

Q: What is an infeasible portfolio?

A: Portfolio:Portfolio refers to the collection or bunch of investment tools such as:StocksMutual funds...