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 11%. What is Dozier's horizon, or continuing, value? 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 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. million Suppose Dozier has $68 million of debt and 36 million shares of stock outstanding. What is your estimate of the 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. $

Explanation / Answer

a.)Horizon value use Perpetuity formula: Next FCF.. (Yr 3 FCF * 1+g)/ WACC - g
= 53(1.07) / (0.11 - 0.07)
=1417.75

b.)Current value is the PV of the stream of cash flows discounted by 1+WACC.
-16/1.11^1 + 18/1.11^2 + 53/1.11^3 + Horizon Value1417.75/1.11^3

= $1075.60

c.) Price per share = 1075.60/36 = $29.88

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