Posted: September 22nd, 2016

Dozier Corporation is a fast-growing supplier of office products. Analysis project the following free cash flows (FCS) during the next 3 years after which FCF is expected to grow at a constant 7 percent rate. Dozier’s cost of capital is WACC = 13%

Question: Dozier Corporation is a fast-growing supplier of office products. Analysis project the following free cash flows (FCS) during the next 3 years after which FCF is expected to grow at a constant 7 percent rate. Dozier’s cost of capital is WACC = 13%

Time 1 2 3

Free Cash Flow -$20 $30 $40
($millions)

a. What is Dozier’s terminal, or horizon, value? (Hint: Find the value of all the free cash flows beyond year 3, discounted back to year 3)
b. What is the current value of operations for Doziers?
c. Suppose Dozier has $10 million in marketable securities, $100 million in debt, and $10 million in shares of stock. What is the price per share?