7. 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 distributionsboth in the form of dividends or stock repurchaseson the firm's value.

Consider the following situation:

Diana is a financial analyst in Eades Logistics Corp's. As part of her analysis of the annual distribution policy and its impact on the firm's value, she makes the following calculations and observations:

The company generated a free cash flow (FCF) of $108.00 million in its most recent fiscal year.The firm's cost of capital (WACC) is 13%. The firm has been growing at 5% for the past six years but is expected to grow at a constant rate of 4% in the future.The firm has 27.00 million shares outstanding.The company has $288.00 million in debt and $180.00 million in preferred stock.

Along with the rest of the finance team, Diana has been part of board meetings and knows that the company is planning to distribute $60.00 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders. Diana also observed that, at this point, apart from the $60.00 million in short-term investments, the firm has no other nonoperating assets.

Question: Using results from Diana's calculations and observations, solve for the values in the following tables. (Note: Round your answers to two decimal places.)

Value of the firm's operations? 1,240.00 million, 60 million, 1,200.00 million, or 6,000.00 million

Intrinsic value of equity immediately prior to stock repurchase? 840.00 million, 1,128.00 million, 780.00 million, or 1,020.00 million

Intrinsic stock price immediately prior to the stock repurchase? 37.78, 28.89, 41.78, or 31.11 per share

Question: Number of shares repurchased? 3.28 million, 1.93 million, 1.54 million, or 2.51 million

Intrinsic value of equity immediately after the stock repurchase? 5,940.00 million, 1,140.00 million, 912.00 million, 780.00 million

Intrinsic stock price immediately after the stock repurchase?31.11, 41.78, 28.89, or 37.78 per share