Corporate valuation
Dollars/shares in millions
FCF1
-$20.00
FCF2
$31.00
FCF3
$43.00
Constant growth rate, gn
7.00%
WACC
15.00%
Market value of debt
$22.00
Common shares outstanding
37
FCFS
Horizon value
Total FCFs
PV of FCFs to investors
0
1
2
3
4
-$20.00
$31.00
$43.00
Firm value today
Market value of equity, MVEquity
Price per share, Po
Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFs) during the next 3 years, after which
F CF is expected to grow at a constant 7% rate. Dantzler's WACC is 15%.
Year
FCF ($
millions)
0
1
2
3
-$20
$31
$43
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.
X
Open spreadsheet
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.
$
million
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.
$
million
c. Suppose Dantzler has $22 million of debt and 37 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.
$
