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# Terminal or Horizon Value

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Dozier Corporation is a fast growing supplier of office products. Analysts project the following free cash flows during the next 3 years, after which FCF is expeted to grow at a constant 7% rate. Doziers cost of capital is WACC=13%

Time 1 2 3
FCF -\$20 \$30 \$40

a) What is Dozier's terminal, or horizon value?
b) What is the current value of operations for Dozier?
c) Suppose Dozier has \$10 million in marketable securities, \$100 million in debt and 10 million shares of stock. What is the price per share?

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#### Solution Preview

a. Terminal Value = FCF in year 4/(WACC-growth Rate)
FCF in year 4=FCF3 X (1+g) = 40X(1+7%) = 42.8
WACC=13%
Growth Rate=7%
Terminal Value in ...

#### Solution Summary

The solution explains how to calculate Dozier's terminal or horizon value, value of operations & price per share

\$2.19