Dozier Corporation is a fast-growing supplier of office products. Analysts proje

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%.

Year 0 1 2 3
....... ....... ....... ....... ....... ....... ....... .......
FCF ($ millions) ....... ....... ....... ....... ....... ....... ....... ......
NA
- 23 26 37

a. 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.)


b. What is the firm's value today? Round your answer to two decimal places.


c. Suppose Dozier has $86 million of debt and 23 million shares of stock outstanding. What is your estimate of the price per share? Round your answer to two decimal places.

Explanation / Answer

Answer question

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37(1.07)/(.13-.07)=659.833

ANSWER: $659.83

-23/1.13^1 + 26/1.13^2 + 37/1.13^3 + Terminal Value 659.83/1.13^3=482.946

ANSWER: $482.95

(482.95-86)/23=17.259

ANSWER: $17.26 per share

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