Dozier Corporation is a fast-growing supplier of office products. Analyst project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7 percent rate.  WACC= 13 percent. Year         : 0 1 2 3 FCF (RM Millions): NA - RM 20 RM 30 RM 40     (i)   What is Dozier’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3)  (ii) What is the firm’s value today?  (iii)  Suppose Dozier has RM 100 million of debt and 10 million shares of stock outstanding. What is your estimate of the price per share?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter8: Basic Stock Valuation
Section: Chapter Questions
Problem 18P: Free Cash Flow Valuation Dozier Corporation is a fast-growing supplier of office products. Analysts...
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Dozier Corporation is a fast-growing supplier of office products. Analyst project the following free cash flows (FCFs) during the next 3 years, after which FCF is expected to grow at a constant 7 percent rate.

 WACC= 13 percent.

Year         :

0

1

2

3

FCF
(RM Millions):

NA

- RM 20

RM 30

RM 40

 



 

(i)   What is Dozier’s terminal, or horizon, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3)

 (ii) What is the firm’s value today?

 (iii)  Suppose Dozier has RM 100 million of debt and 10 million shares of stock outstanding. What is your estimate of the price per share?

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