Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
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Question
Chapter 15, Problem 12P
a)
Summary Introduction
To determine: Value of operations.
b)
Summary Introduction
To determine: Intrinsic value of equity preceding to repurchase.
c)
Summary Introduction
To determine: Intrinsic stock price of company prior to re-purchase.
d)
Summary Introduction
To determine: Number of shares will be repurchased and number of shares after re-purchase.
e)
Summary Introduction
To determine: Intrinsic value of equity and stock price after repurchase.
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5. Bayani Bakery's most recent FCF was $45million; the FCF is expected to grow at a constant rate of 6%. The firm's WACC is 14%, 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 through via a stock repurchase; the firm has no other non-operating assets. It has $362 million in debt and $61 million in preferred stock.
What is the value of operations? Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Round your answer to two decimal places.
A firm's board of directors has authorized stock repurchases of $10 million one year from now and $15 million two years from now. Three years from now, the firm will discontinue share repurchases. Instead, the firm will pay dividends totaling $20 million three years from now. Beginning in the fourth year, dividends are expected to grow at a rate of 2% forever. There are 7 million common shares outstanding and the equity cost of capital is 7.8 percent. What is each share of stock worth today?
The shares of a company trade today for $37. The company is fairly valued at this current price. There are 39 million shares outstanding prior to the repurchase. The company has announced that it intends to spend $265 million on an open market repurchase. Assume that the company is able to repurchase shares at a price of $39.00. Assume that the company is all-equity financed.
What fraction of shares does the company repurchase?
What is the share price after the repurchase?
Chapter 15 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 15 - Define each of the following terms: a. Optimal...Ch. 15 - How would each of the following changes tend to...Ch. 15 - What is the difference between a stock dividend...Ch. 15 - One position expressed in the financial literature...Ch. 15 - Indicate whether the following statements are true...Ch. 15 - Prob. 1PCh. 15 - Prob. 2PCh. 15 - Dividend Payout
The Wei Corporation expects next...Ch. 15 - Prob. 4PCh. 15 - Prob. 5P
Ch. 15 - Prob. 6PCh. 15 - Stock Split
Suppose you own 2,000 common shares of...Ch. 15 - Stock Split Fauver Enterprises declared a 3-for-1...Ch. 15 - Residual Distribution Policy Harris Company must...Ch. 15 - Prob. 10PCh. 15 - Prob. 11PCh. 15 - Prob. 12PCh. 15 - Integrated Waveguide Technologies (IWT) is a...Ch. 15 - Prob. 2MCCh. 15 - Assume that IWT has completed its IPO and has a...Ch. 15 - Prob. 4MCCh. 15 - Prob. 5MCCh. 15 - Suppose IWT has decided to distribute $50 million,...Ch. 15 - Prob. 7MCCh. 15 - Prob. 8MCCh. 15 - Prob. 9MC
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