15-2: Best Bakery's most recent FCF was $40 million which is expected to grow at a constant rate of 5%. The firm's WACC is 12%, and it has $15 million shares of common stock outstanding. The firm has $70 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the firm has no other non-operating assets. It has $300 million in debt and $70 million in preferred stock.

a. What is the value of operations?

b. Immediately prior to the repurchase, what is the intrinsic value of equity?

c. Immediately prior to the repurchase, what is the intrinsic stock price?

d. How many shares will be repurchased? How many shares will remain after the repurchase?

e. Immediately after the repurchase, what is the intrinsic value of equity?

f. What is the intrinsic stock price?

15-3: Light Feet Corporation's value of operations is estimated to be about $800 million. The compay has $160 million in debt. It has no preferred stock, but has 25 million shares of stock outstanding. It Feet has decided to distribute $60 million, which it presently is holding in short-term investments.

1. Assume that the company has not yet made the distribution. What is the intrinsic value of equity? What is its intrinsic per share stock price?
2. Now suppose that the company has just made the $60 million distribution in the form of dividends. What is Light Feet's intrinsic per share stock price after this dividend payment?
3. Suppose instead that the company just made the $60 million distribution in the form of a stock repurchase. What is its intrinsic per share stock price after the repurchase?