Value of operations.

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Answer 1

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.

Refi Corporation is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firm’s debt-equity ratio is expected to rise from 30 percent to 50 percent. The firm currently has $2.7 million worth of debt outstanding. The cost of this debt is 9 percent per year. The firm expects to have an EBIT of $1.26 million per year in perpetuity and pays no taxes. a. What is the market value of the firm before and after the repurchase announcement? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. What is the expected return on the firm’s equity before the announcement of the stock repurchase plan? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the expected return on the equity of an otherwise identical all-equity firm? (Do not round intermediate calculations and…

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 $428 million in debt. (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? (e) How many shares will remain after the repurchase? (f) Immediately after the repurchase, what is the intrinsic value of equity? (g) Immediately after the repurchase, what is the intrinsic stock price?

Answer 2

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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Answer 3

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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Answer 4

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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Answer 5

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.

Answer 6

Chapter 15, Problem 12P

a)

Summary Introduction

To determine: Value of operations.

Answer 7

Chapter 15, Problem 12P

a)

Summary Introduction

To determine: Value of operations.

Answer 8

b)

Summary Introduction

To determine: Intrinsic value of equity preceding to repurchase.

Answer 9

b)

Summary Introduction

To determine: Intrinsic value of equity preceding to repurchase.

Answer 10

c)

Summary Introduction

To determine: Intrinsic stock price of company prior to re-purchase.

Answer 11

c)

Summary Introduction

To determine: Intrinsic stock price of company prior to re-purchase.

Answer 12

d)

Summary Introduction

To determine: Number of shares will be repurchased and number of shares after re-purchase.

Answer 13

d)

Summary Introduction

To determine: Number of shares will be repurchased and number of shares after re-purchase.

Answer 14

e)

Summary Introduction

To determine: Intrinsic value of equity and stock price after repurchase.

Answer 15

e)

Summary Introduction

To determine: Intrinsic value of equity and stock price after repurchase.

Answer 16

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Answer 17

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Answer 18

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Answer 19

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Value of operations.

Solution Summary: The author explains the calculation of intrinsic value of equity and stock price after repurchase.

To determine: Value of operations.

To determine: Intrinsic value of equity preceding to repurchase.

To determine: Intrinsic stock price of company prior to re-purchase.

To determine: Number of shares will be repurchased and number of shares after re-purchase.

To determine: Intrinsic value of equity and stock price after repurchase.

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