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%.Year0123...................................FCF ($ millions)............................  -$19$26$35a. 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.

Question
Asked Nov 21, 2019
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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.

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Expert Answer

Step 1

Part A-C:

Calculation of Horizon Value Firm, Value today and Current Share Price:

The horizon value is $1,260 million, firm value today is $950.88 million and current share price is $24.83.

Excel Spreadsheet:

...
В
C
FCF (in million) FVIF @ 11%|PV of FCF (in million)
($17.12)
$21.10
1
Year
($19)
2
1
1.1100
1.2321
$26
2
$35
$25.59
4
1.3676
s1,260
Firm Value Today (in million)
Value of Debt (in million)
Shares Outstanding (in million)
Value of Equity (in million)
$921.30
5 Horizon Value
$950.88
6
$181
8
31
$769.88
$24.83
10
Current Share Price
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В C FCF (in million) FVIF @ 11%|PV of FCF (in million) ($17.12) $21.10 1 Year ($19) 2 1 1.1100 1.2321 $26 2 $35 $25.59 4 1.3676 s1,260 Firm Value Today (in million) Value of Debt (in million) Shares Outstanding (in million) Value of Equity (in million) $921.30 5 Horizon Value $950.88 6 $181 8 31 $769.88 $24.83 10 Current Share Price

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