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 0 1 2
FCF ($ millions)
3
–$11 $17 $45
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.)
b. What is the firm’s market value today? Assume that Dantzler has zero non-operating
assets.
c. Suppose Dantzler has $112.60 million of debt and 25 million shares of stock outstanding.
What is your estimate of the current price per share?