M EDT Excel Online Structured Activity: Corporate valuation Dantzler Corporation
ID: 1171159 • Letter: M
Question
M EDT Excel Online Structured Activity: Corporate valuation Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (Fas) during the next 3 years, after which FCF is expected to grow at a constant 5% rate. Dantzler's WACC is 10%. Year FCF (S millions) 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 -$8$10 $55 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 answer in millions. b. What is the firm's value today? Round your answer to two decimal places. Enter your a For example, an answer of $13,550,000 should be entered as 13.55. Do not round your intermediate million c. Suppose Dantzler has $66 million of debt and 9 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. pts (0%) 340400000 1:32 PM r.Explanation / Answer
a.Present Value of terminal Cash flows is given by the formula
PV = CF4/Discount Rate – Growth Rate
=55(1+0.05)/0.10-0.05
= 57.75/0.05
=1155
b.Firm’s Value Today = Present Value of All future Cash Flows
=-8/(1+0.1) + 10/(1+0.1)(1+0.1) + 55/(1+0.1)(1+0.1)(1+0.1) + Terminal value
=-7.27+8.26+41.305+1155
=1197.30
c.Firm’s Value today = 1197.30 million
Less: Value of Debt 66 million
Value of Equity = 1131.30 million
No. Of Shares = 9 million
Therefore, EPS = 125.7
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