Question

Excel Online Structured Activity: Corporate valuation Dantzler 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 5% rate. Dantzler's WACC is 11%. Year FCF ($ millions) - $14 $17 $36 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. Open spreadsheet 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. $ 3783 million b. What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example,

Answer 1

a]	Horizon or continuing value = 36*1.05/(0.11-0.05) =	$           630.00	million
b]	PV of CF at t1 = -14/1.11 =	$            -12.61
	PV of CF at t2 = 17/1.11^2 =	$             13.80
	PV of CF at t3 = 36/1.11^3 =	$             26.32
	PV of continuing value = 630/1.11^3 =	$           460.65
	Firm's value today	$           488.16	million
c]	Value of the firm	$           488.16	million
	-Debt	$             85.00	million
	=Value of equity	$           403.16	million
	# shares	30	million
	Estimated current share price	$             13.44