Newington Inc.'s most recent FCF was S150 million; the FCF is expected to grow at a constant rate of 6% The firm's WACC is 11%, and it has 40 million shares of common stock outstanding. The firm has S80 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 $550 million in debt and $100 million in preferred stock. 4. Immediately prior to the repurchase, what is the intrinsic stock price of Newington Inc.? a. $64.50 b. $64.75 c. $65.25 d. $65.75 e. $66.15 5. How many shares will Newington Inc. repurchase? (in millions) a. 1.22 b. 1.27 c. 1.32 d. 1.40 e. 1.50 6. Hartford Resources stock has increased significantly over the last five years, selling now for $175 per share. Management feels this price is too high for the average investor and wants to get the price down to a more typical level, which it thinks is $25 per share. What stock split would be required to get to this price, assuming the transaction has no effect on the total market value? Put another way, how many new shares should be given per one old share? a. 6.65 b. 6.98 c. 7.00 d. 7.35 e. 7.72 7. Which of the following statements is CORRECT? a. There is no reason to think that changes in the personal tax rate would affect firms' capital structur decisions. b. A firm with high business risk is more likely to increase its use of financial leverage than a firm with low business risk, assuming all else equal. c. If a firm's after-tax cost of equity exceeds its after-tax cost of debt, it can always reduce its WAC by increasing its use of debt. d. Suppose a firm has less than its optimal amount of debt. Increasing its use of debt to the point where it is at its optimal capital structure will decrease the costs of both debt and equity financi In general, a firm with low operating leverage also has a small proportion of its total costs in th form of fixed costs