roblem 7-18 Free Cash Flow Valuation Dozier Corporation is a fast-growing suppli

Question

roblem 7-18 Free Cash Flow Valuation 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 10% rate. Dozier's weighted average cost of capital is WACC = 15%. Year 1 2 3 Free cash flow ($ millions) -$20 $30 $40 What is Dozier's horizon 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. $ million What is the current value of operations for Dozier? Do not round intermediate calculations. Round your answer to two decimal places. $ million Suppose Dozier has $10 million in marketable securities, $100 million in debt, and 10 million shares of stock. What is the intrinsic price per share? Do not round intermediate calculations. Round your answer to the nearest cent. $

Explanation / Answer

Enterprise value = Equity+ Debt-Cash and Marketable securities

Equity= Price per share * # of shares

=> Price per share= $50.02

Year 0 Year 1 Year 2 Year 3 Perpetuity FCFF -20 30 40         44.00 Growth Rate 10% WACC 15% 15% 15% 15% Terminal Value 880 Present Value           (17)             23             26            579 Enterprise value           610

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