16th Edition

ISBN: 9781337909730

Author: Brigham

Publisher: Cengage

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Chapter 14, Problem 12P

Bayani Bakery’s most recent FCF was $48 million; the FCF is expected to grow at a constant rate of 6%. The firm’s WACC is 12%, and it has 15 million shares of common stock outstanding. The firm has $30 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the firm has no other nonoperating assets. It has $368 million in debt and $60 million in preferred stock.

a. What is the value of operations?
b. Immediately prior to the repurchase, what is the intrinsic value of equity?
c. Immediately prior to the repurchase, what is the intrinsic stock price?
d. How many shares will be repurchased? How many shares will remain after the repurchase?
e. Immediately after the repurchase, what is the intrinsic value of equity? The intrinsic stock price?

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Chapter 14, Problem 11P

Chapter 14, Problem 1MC

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Chapter 14 Solutions

Financial Management: Theory & Practice

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