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 unders the impact of distributions-both in the form of dividends or stock repurchases-on the firm's value. Consider the following situation: Danielle is a financial analyst in BTR Warehousing. 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 flow (FCF) of $84 million in its most recent fiscal year. - The firm's cost of capital (WACC) is 12%. The firm has been growing at 7% for the past six years but is expected to grow at a constant rate of 6% in the future. - The firm has 21.00 million shares outstanding. - The company has $224 million in debt and $140 million in preferred stock. Along with the rest of the finance team, Danielle has been part of board meetings and knows that the company is planning to distribute $90 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders. Danielie also observed that, at this point, apart from the $90 million in short-term investments, the firm has no other nonoperating assets. Using results from Danielle's calculations and observations, solve for the values in the following tables. Select the best answer provided in the selection list. 15: Assignment - Distributions to Shareholders: Dividends and Repurchases Along with the rest of the finance team, Danielle has been part of board meetings and knows that the company 15 planning to distribute $90 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders. Danielle also observed that, at this point, apart from the $90 million in short-term investments, the firm has no other nonoperating assets. Using results from Danielle's calculations and observations, solve for the values in the following tables. Select the best answer provided in the selection list. Ir false: The value of operations depends on whether a firm decides to make distributions in the form of dividends or stock repurchases. This statement is because ignoring possible tax effects and signals, the value of a firm's operations depend on how the firm distributes its residual eamings. $90 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders. Danielle also observed that, at this point, apart from the $90 million in short-term investments, the firm has no other nonoperating assets. Ising results from Danielle's calculations and observations, solve for the values in the following tables. Select the best answer provided in the election list. ir false: The value of operations depends on whether a firm decides to make distributions in the form of dividends or stock repurchases. This statement is because ignoring possible tax effects and signals, the value of a firm's operations depend on how the firm distributes its residual earnings. $90 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders. Danielle also observed that, at this point, apart from the $90 million in short-term investments, the firm has no other nonoperating assets. Ising results from Danielle's calculations and observations, solve for the values in the following tables. Select the best answer provided in the election list. ir false: The value of operations depends on whether a firm decides to make distributions in the form of dividends or stock repurchases. This statement is because ignoring possible tax effects and signals, the value of a firm's operations depend on how the firm distributes its residual earnings. 5: Assignment - Distributions to Shareholders: Dividends and Repurchases Along with the rest of the finance team, Danielle has been part of board meetings and knows that the company is planning to distribute $90 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders. Danielle also observed that, at this point, apart from the $90 million in short-term investments, the firm has no other nonoperating assets. ising results from Danielle's calculations and observations, solve for the values in the following tables. Select the best answer provided in the election list. The value of operations depends on whether a firm decides to make distributions in the form of dividends or stock repurchases. This statement is because ignoring possible tax effects and signals, the value of a firm's operations depend on how the firm distributes its residual eamings. 15: Assignment - Distributions to Shareholders: Dividends and Repurchases Aong with the rest of the tinance team, Danielie has been part of beard meetings and knows that the company is planning to distribute $90 million, which is invested in shortiterm investments, to its shareholders by buying back stock from its shareholders. Danielle also observed that, at this point, apart from the $90 militon in short-term investments, the firm has no other nonoperating assets. Using results from Danielles calculations and observations, solve for the values in the following tables. Select the best answer prowided in the selection list. ror falve: dividends of stock reourchases. This statement is because ighering possible tax effects and signals, the value of a firms operations depend on how the firm distributes its residual eamings
