Ch 15: Assignment- Distributions to Shareholders: Dividends and Repurchases 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 A- Anusha is a financial analyst in RTE Telecom Inc. 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 Now (FCF) of $37 million in its most recent fiscal year. . The firm's cost of capital (WACC) is 13%. The firm has been growing at 10% for the past six years but is expected to grow at a constant rate of 8% in the future. . The firm has 21.75 million shares outstanding . The company has $232 million in debt and $145 million in preferred stock. Along with the rest of the finance team, Anusha has been part of board meetings and knows that the company is planning to distribute $120 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders, Anusha also observed that at this point, apart from the 5120 million in short-term investments, the firm has no other nonoperating assets. Using results from Anusha's calculations and observations, solve for the values in the following tables. Select the best answer provided in the selection Ch 15: Assignment - Distributions to Shareholders: Dividends and Repurchases ch this course 0 x Using results from Anusha's calculations and observations, solve for the values in the following tables Select the best wwwer provided in the selection A-2 Value per share Value of the firm's operations Intrinsic value of equity immediately prior to stock repurchase Intrinsic stock price Immediately prior to the stock repurchase Number of shares repurchased Intrinsic value of equity immediately after the stock repurchase Intrinsic stock price immediately after the stock repurchase ry Based on your understanding of stock repurchases, identify whether following statement is true or false The stock price of a firm increases after the firm repurchases some of its shares arbitrage This statement is because if the stock price changes after a fim conducts its share repurchase, then there opportunities. Thus, the price of the stock remains the same after a repurchase