Dozier Corporation is a fast-growing supplier of office products. Analysts proje
ID: 2652202 • Letter: D
Question
Dozier 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 7% rate. Dozier's WACC is 13%.
NA
What is Dozier's terminal, or horizon, value? Round your answer to two decimal places.
(Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.)
What is the firm's value today? Round your answer to two decimal places.
Suppose Dozier has $33 million of debt and 24 million shares of stock outstanding. What is your estimate of the price per share? Round your answer to two decimal places.
Year 0 1 2 3 ....... ....... ....... ....... ....... ....... ....... ....... FCF ($ millions) ....... ....... ....... ....... ....... ....... ....... ......NA
- 20 22 56Explanation / Answer
What is Dozier's terminal, or horizon, value? Round your answer to two decimal places.
(Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.)
Dozier's terminal, or horizon, value = FCF 4/(WACC - growth rate)
Dozier's terminal, or horizon, value= 56*1.07/(13%-7%)
Dozier's terminal, or horizon, value = $ 998.67 Million
What is the firm's value today? Round your answer to two decimal places.
Firm's value today = FCF1/(1+wacc) + FCF2/(1+wacc)^2 + FCF3/(1+wacc)^3 +Dozier's terminal, or horizon, value/(1+wacc)^3
Firm's value today = -20/1.13 + 22/1.13^2 + 56/1.13^3 + 998.67/1.13^3
Firm's value today = $ 730.47 Million
Suppose Dozier has $33 million of debt and 24 million shares of stock outstanding. What is your estimate of the price per share? Round your answer to two decimal places.
Equity Value = Firm's value today - Debt
Equity Value = 730.47 - 33
Equity Value = $ 697.47 Million
Estimate of the price per share = Equity Value/No of stock outstanding
Estimate of the price per share = 697.47/24
Estimate of the price per share = $ 29.06
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