6. Dividends, repurchases, and firm value Remember that the primary goal of a firm is to maximize shareholder wealth by increasing the firm's intrinsic value. It is thus important to understand the impact of distributions-both in the form of dividends or stock repurchases - on the firm's value. Consider the following situation: Danielle is a finanoal analyst in Elanche inc. As part of her analysis of the annual distnbution policy and its impact on the firm 's value. she makes the following calculations and observabons: - The company generated a free cash flow (for) of $135 millon in its most recent fiscal year - The firm's cost of captal (WACC) is 14%. The firm has been growing at 5\% for the past sic years but is expected to grow at a constant rate of 4% in the future. - The firm has a3.75 milion shares outstanding. - The company has $360 million in debt and $225 million in prefered stock. Along with the rest of the finance team, Danielle has been part of board meetings and knows that the compscy is olarning ta distnbute $60 milion, which is invested in short:term investments, to its shareholders by buying bock ateck fromnts shareholders Demelto also observed thet, at this point, apart from the 160 milion in short-term investments, the firm has no other nongeeratung assets. Using results from Danielle's calculations and observations, solve for the values in the following tables. Select the best answer provided in the selection list. Based on your understanding of stock repurchases, identify whether the following statement is true or false: The stock peice of a firm increasen atter the firm repurchases some of lis shares. This statemant is because if the stock price changes after a firm conducts its share repurchase, then there opportunities. Thus, the price of the stock remains the sarne after a reporchase. 6. Dividends, repurchases, and firm value Remember that the primary goal of a firm is to maximize shareholder wealth by increasing the firm's intrinsic value. It is thus important to understand the impact of distributions-both in the form of dividends or stock repurchases - on the firm's value. Consider the following situation: Danielle is a finanoal analyst in Elanche inc. As part of her analysis of the annual distnbution policy and its impact on the firm 's value. she makes the following calculations and observabons: - The company generated a free cash flow (for) of $135 millon in its most recent fiscal year - The firm's cost of captal (WACC) is 14%. The firm has been growing at 5\% for the past sic years but is expected to grow at a constant rate of 4% in the future. - The firm has a3.75 milion shares outstanding. - The company has $360 million in debt and $225 million in prefered stock. Along with the rest of the finance team, Danielle has been part of board meetings and knows that the compscy is olarning ta distnbute $60 milion, which is invested in short:term investments, to its shareholders by buying bock ateck fromnts shareholders Demelto also observed thet, at this point, apart from the 160 milion in short-term investments, the firm has no other nongeeratung assets. Using results from Danielle's calculations and observations, solve for the values in the following tables. Select the best answer provided in the selection list. Based on your understanding of stock repurchases, identify whether the following statement is true or false: The stock peice of a firm increasen atter the firm repurchases some of lis shares. This statemant is because if the stock price changes after a firm conducts its share repurchase, then there opportunities. Thus, the price of the stock remains the sarne after a reporchase