Dozier's Horizon value is $60 million. The expected worth of a security or investment at some point in the future is known as a horizon value.
The worth of a security or asset at a specific future time is referred to as the horizon value or terminal value. For analysis and cash flow models, the horizon value is employed. Divide the annual cash flow by the discrepancy between the needed rate of return and the growth rate to determine the horizon value. The value of future cash flows that occur after a projection period of several years can be included, and many of the issues associated with valuing such cash flows are adequately resolved, thanks to the terminal value. In discounted cash flow analysis, the terminal value is determined using a stream of anticipated future free cash flows. There are two methods for determining the Terminal Value for whole-company valuation.
Horizon value = (Free cash flow for last year × Growth rate) ÷
(WACC - Growth rate)
It is given that free cash flow for last year = $40
Growth rate = 9% = 0.09
WACC = 15% = 0.15
Thus, Horizon value = (40 × 0.09) ÷ (0.15 - 0.09)
= 3.6 ÷ 0.06
= 60 million
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