Question

oymentid-56063033453463044987234693 8elSBN =9781 3372992208id-531963581 8snapshotld=1265231& MINDTAP Search this c ter 09 End-of-Chapter Problems t: Brigham Chapter 09 End-of-Chapter Problems Assignment Score: 0.00% Submit Assignment for Grading Save Question 2 of 8 Check My Work (1 remaining) Problem 9-15 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 4 % rate. Dantzler's WACC is 14 % . 0 1. 2 Year 3 FCF (S NA $25 $32 $56 millions) 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 million b. 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. Do not round your intermediate calculations. million c. Suppose Dantzler has $184 million of debt and 5 million shares of stock outstanding. What is your estimate of the current 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 Check My Work (a remaining) O o Kry Question 2 of 8 Save Submit Assignment for Grading O

Answer 1

Year Cash flows pv @ 14% -$25.00 0.87719 $32.00 0.76947 $56.00 0.67497 $582.40 (56*1.04)/(0.14-0.04) 0.67497 Present value of future cash flows ( value of the firm ] Present value -$21.93 $24.62 $37.80 $393.10 $433.59 value of firm at year 3 Horizon value = $582.40 million Value today= $433.59 million value of the firm = add: marketable secu. less: debt = value of equity = $434 $0 $184.0 $250 million share price = $49.92 [ 250 5]