Stock Repurchase Bayani Bakery\'s most recent FCF was $45 million; the FCF is ex

Question

Stock Repurchase

Bayani Bakery's most recent FCF was $45 million; the FCF is expected to grow at a constant rate of 6%. The firm's WACC is 10%, 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 $360 million in debt and $61 million in preferred stock.

a. 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.
$ 1192.5million

b.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.
$ 801.5million

c.Immediately prior to the repurchase, what is the intrinsic stock price? Round your answer to the nearest cent.
$ 54.43 per share

d. 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

please answer question d

Explanation / Answer

A. Value of Operations = (FCF (1+G)) / (WACC - g) = (45 (1+0.06)) / (0.10 - 0.06) = $1192.5 million.

B. Total intrinsic Value = 1192.5 + 30 = 1222.5

; = 1222.5 - debt - Preferred stock = 1222.5 - 360-61 = 801.5 million

C. Intrinsic stock price = Intrinsic value of equity / Number of share

= 801.5 / 15 =$ 53.43 per share

D. Share Repurchased = 30, 000, 000 / 30 = 1000000 = 1 million

After repurchase = 15 million - 1 million = 14 million

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