Question

Stock Repurchase

Bayani Bakery's most recent FCF was $49 million; the FCF is expected to grow at a constant rate of 6%. The firm's WACC is 13%, 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 $361 million in debt and $63 million in preferred stock.

1. What is the value of operations? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
   $ million
2. Immediately prior to the repurchase, what is the intrinsic value of equity? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
   $ million
3. Immediately prior to the repurchase, what is the intrinsic stock price? Round your answer to the nearest cent.
   $ per share
4. How many shares will be repurchased? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. 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 $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
      million shares
5. Immediately after the repurchase, what is the intrinsic value of equity? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
   $ million
   
   The intrinsic stock price? Round your answer to two decimal places.
   $ per share

Answer 1

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Home ert Page Layout Formulas Data Review V Add-Ins 義Cut aCopy Format Painter Σ AutoSum , 11 Arap Text Fill В า 프. m. d..Δ. Ξミ 迣锂函Merge & Center. 弼皛Conditional-Format. Cell. Insert Delete Format $, % , Sort &Find & Formatting as Table Styles ClearFilter Select Clipboard Font Cells dting Alignment W266 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 1 value of operations FCF(1+8)/(WACC-g) Value of operations49(1+0.06)/(0.13-0.06)- 742.00 MILLION 2 Immediately prior to repurchase, intrinsic value of equity total value of the firm value of operationsvalue of short term investment total value of the firm- intrinsic value of equity total value of firm - debt - preferred stock intrinsic value of equity 742 30- 772.00 MILLION 772-361 -63 348.00 MILLION 3 intrinsic stock price intrinsic value of equity/no of common shares outstanding 348/15 23.20 4 no of shares repurchased 30 million/23.20 rounding = 1.29 million 1.2931 million confidence INDEX CURRENCY LOAN CROSS OVER HEDGING MONEY MARKET GM HPR AM TAX GROWTH SUST PREF AND DIV POLICY DD OCF CASH FLOW STATN | FCF erences: EV46 11:33 07-05-2019

Home ert Page Layout Formulas Data Review V Add-Ins 義Cut aCopy Σ AutoSum , 11 Arap Text Fill В า 프. m. d..Δ. Ξミ 迣锂函Merge & Center. 弼皛Conditional-Format. Cell. Insert Delete Format $, % , Sort &Find & Filter Select ▼-yr Format Painter 袖 2 Clear , Formatting ▼ as Table-styles ▼ ▼ ▼ ▼ Clipboard Font Cells dting Alignment W301 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 5 no of shares are repurchase 15 million 1.2931 million 13.7069 million 13.71 million 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 742-361 -63 318.00 MILLION 7 after repurchase, intrinsic stock price 318/13.7069 (AS TAXES ARE ABSENT, THE PRICE SHOULD REMAIN SAME) 23.20 confidence INDEX CURRENCY LOAN CROSS OVER HEDGING MONEY MARKET GM HPR AM TAX GROWTH SUST PREF AND DIV POLICY DD OCF CASH FLOW STATN | FCF erences: EV46 11:33 07-05-2019