A firm whose shares traded at three times their book value on December 31, 2008, had the accompanying financial statements. Amounts are in millions of dollars. The firm's marginal tax rate is 33 percent. There are no dirty-surplus income items in the balance sheet.

a. The firm paid no dividends and issued no shares during 2008, but it repurchased some stock. Calculate the amount of stock repurchased.

b. Calculate the following measures:

Return on common equity (ROCE)

Return on net operating assets (RNOA)

Financial leverage (FLEV)

The operating spread (SPREAD)

Free cash flow

c. Does it make sense that this firm's shares should trade at three times bookvalue?

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Balance Sheet, December 31, 2008 Liabilities and Assets 2008 2007 Shareholders' Equity 2008 2007 Accounts payable Long-term debt S 215 205 450 Operating cash Short-tem iavestments Accounts receivabie nventories Property and plant (nei) 47 50 150 300 420 20 150 250 470 450 Common equity 1,095 1,025 $1,7601,680 $1,7601,680 lncome Statement, Year Ended December 31, 2008 $3,295 Sales nteest income Operatingexpenses interest expense Tax expense Net income 3,048 35 6 3,145) S 159