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Free cash flows-what is the current value of operations

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Reference no: EM131312363

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 7% a year. Dozier’s WACC is 13%. Its cash flows for Year 1 is negative $20 million (negative implies more cash is going out than coming in), Year 2 is $30 million, and Year 3 is $40 million.

a) What is Dozier’s horizon value? (Hint: Find the value of all FCSs beyond Year 3, and discount them back to Year 3.)

b) What is the current value of operations?

c) Suppose Dozier has $10 million in marketable securities, $100 million in debt, and 10 million shares of stock. What is its intrinsic price per share?

Reference no: EM131312363

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