A firm whose shares traded at three times their book value on December 31, 2012, 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 equity statement.

a. The firm paid no dividends and issued no shares during 20 12, 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 book value?

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Balance Sheet, December 31, 2012 Liabilities and Shareholders' Equity 2012 Assets 2012 2011 2011 $ 50 $ 20 $ 215 Accounts payable Long-term debt $ 205 Operating cash Short-term investments 150 450 150 450 Accounts receivable 300 250 1,095 Inventories 420 470 Common equity 1,025 Property and plant (net) 840 790 $1,760 $1,680 $ 1,760 $1,680 Income Statement, Year Ended December 31, 2012 $3,295 Sales Interest income Operating expenses $3,048 Interest expense 36 (3,145) Тах еxpense 61 $ 159 Net income