Corporate valuation Dozier Corporation is a fast-growing supplier of office prod
ID: 2804834 • Letter: C
Question
Corporate 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 7% rate. Dozier's WACC is 12%. FCF (S millions) NA 35 49 a. What is Dozier'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 b. What is the firm's value today? Round your answer to two decimal places million c. Suppose Dozier has $123 million of debt and 26 million shares of stock outstanding. What is your estimate of the price per share? Round your answer to two decimal placesExplanation / Answer
a)
Horizontal value = 49 *(1 +7%)/12%-7%
= 39*1.07/0.05
= 834.6 million
b)
value of firm today
= -22/1.12 + 35/1.12^2 + 49/1.12^3 + 834.6/1.1^3
= 670.18 million
c)
value of equity = 670.18 - 123 = 547.18 million
price per share = 547.18/26 = 21.05