Question

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 10%, 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 $61 million in preferred stock.

1. 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.
   $   million
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5. Immediately prior to the repurchase, what is the intrinsic value of equity? 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.
   $   million
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9. Immediately prior to the repurchase, what is the intrinsic stock price? Round your answer to the nearest cent.
   $   per share
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13. How many shares will be repurchased? 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.
       million shares
    
    How many shares will remain after the repurchase? 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.
       million shares
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17. Immediately after the repurchase, what is the intrinsic value of equity? 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.
    $   million
    
    The intrinsic stock price? Round your answer to the nearest cent.
    $   per share

Answer 1

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NPV, IRR, PBP,OCFINDEX - Microsoft Excel (Product Activation Failed) View Add-Ins Formulas Data Review - 2x Σ AutoSum : A 11 A = = = V General A A Wrap Text Merge & Center $ - % 8. Conditional Format Formatting as Table Styles Cell Styles Insert Delete Format Fill Clear Sort & Filter Editing Find & Select Alignment Number Cells File Home Insert Page Layout % Cut Calibri Ea Copy Paste Format Painter B I U - D Clipboard Font W316 - five До P Q 298 299 300 R T U V W X 1 value of operations = FCF(1+g)/(WACC-g) Value of operations = 48(1+0.06)/(0.10-0.06)= 301 1272.00 MILLION 302 303 304 305 2 Immediately prior to repurchase, intrinsic value of equity total value of the firm = value of operations + value of short term investment total value of the firm = 1272 +30 = 1302.00 MILLION intrinsic value of equity = total value of firm - debt - preferred stock intrinsic value of equity = 1302 - 368-61 = 873.00 MILLION 306 307 3 intrinsic stock price intrinsic value of equity/ no of common shares outstanding 873/15 = 58.20 308 309 310 311 312 313 314 315 4 no of shares repurchased 30 million/58.20 = 0.5155 million rounding = 0.52 million 316 H O FCFARM, MSI,confidenceINDEX CURRENCY LOAN CROSS OVER HEDGING MONEY MARKET GM HPR AM TAX GROWTH SUST I CF CASH FLOW STATW ferences: EV46 PREF AND DIV POLICY 20J 130% Rea 0 + DO 4 * 4 0 ENG 30-10-2019

NPV, IRR, PBP,OCFINDEX - Microsoft Excel (Product Activation Failed) View Add-Ins File Home Insert Page Layout Formulas Data Review - 2x % Cut 11 A = = = V General A A Wrap Text Merge Merge & Center Center Σ AutoSum : A Fill 2 Sort & m Find & SF $ - % % 4:0 .00 8. Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Clear Calibri E Copy Paste Format Painter B I Clipboard W333 До P Select Filter Editing Alignment Number Cells U - D Font Fax Q R T U V W X 315 316 317 318 319 320 5 no of shares are repurchase 15 million - 0.5155 million = 14.4845 million 14.48 million 321 322 323 324 6 after repurchase, intrinsic value as short term investments are sold off intrinsic value of equity = value of operations - debt -preferred stock intrinsic value of equity = 1272-368-61 = 843.00 MILLION 325 7 after repurchase, intrinsic stock price 843/14.4845 = (AS TAXES ARE ABSENT, THE PRICE SHOULD REMAIN SAME) 58.20 326 327 328 329 330 331 332 333 H O FCFARM, MSI,confidenceINDEX CURRENCY LOAN CROSS OVER HEDGING MONEY MARKET GM HPR AM TAX GROWTH SUST I CF CASH FLOW STATW ferences: EV46 PREF AND DIV POLICY 20J 130% Red 0 + DO 4 * 4 0 ENG 30-10-2019