6. Dividends, repurchases, and firm value Remember that the primary goal of a firm is to maximize shareholder wealih by incressing the fimis istrinic value. It is thus inocitant to wedertand. the impact of distributions - both in the form of dividends or stock reporchases-on the firm's value. Consider the following situation: Anusha is a financial analyst in RTE Telecem Inc. As part of her analysis of the antual distribution policy and as linpset on the firm' value, she makes the following calculations and observations: - The company generated a free cash flew (FCF) of $87 million in its mest recent fivcal yeat. - The firm's cost of capital (WACC) is 13%. The firm has been growing at 104 for the past six years but is expected to grow at a constant rate of 89 in the future. - The firm has 21.75 million shares outstandint. - The corripary has $232 millon in debt and $145 milison in preferred stock. Along with the rest of the finance team, Anusha has been part of board meetings and innows that the campany is pianning ta distribute $120 milion, 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 shert-term investments, the firm has no other nonoperating assecs. Using results from Anusha's cajculations and observations, solve for the values in the following tobles. Select the best answer provided in the selection list. Based on your understanding of stock repurchases, identify whether the following statement is true or falsel The stock price of a firm increases after the firm repurchases some of its sthares. This statement is because if the stock price changes after a firm conducts its share repurchase, then there arbitrage opportunities. Thus, the price of the stock remains the same after a repurchase