Value of firm's operations:

$120.86 Million

$12,085.71 Million

$2,014.29 Million

$2,115 Million

Intrinsic value of equity:

$1,504 Million

$1,955 Million

$1,579 Million

$1,814 Million

Intrinsic Stock Price:

$55.46

$42.67

$51.46

$44.79

Number of shares repurchased:

1.6 million

1.34 million

2.84 million

2.17 million

Intrinsic value of equity (2nd one right side)

$1,504 million

$12,010.71 million

$1,638.29 million

$1,939.29 million

intrinsic stock price (2nd right side)

$51.46

$44.79

$55.46

$42.67

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T/F

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does or does not

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 understand the impact of distributions-both in the form of dividends or stock repurchases-on the firm's value Consider the following situation Elle is a financial analyst in Smith and T Co. 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 $141 million in its most recent fiscal year. The firm's cost of capital (WACC) is 12%. The firm has been growing at 6% for the past six years but is expected to grow at a constant rate of 5% in the future. The firm has 35.25 million shares outstanding. The company has $376 million in debt and $235 million in preferred stock. Along with the rest of the finance team, Elle has been part of board meetings and knows that the company is planning to distribute $75 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders. Elle also observed that, at this point, apart from the $75 million in short-term investments, the firm has no other nonoperating assets. Using results from Elle's calculations and observations, solve for the values in the following tables. Select the best answer provided in the selection list. Value Value Value of the firm's operations Number of shares repurchased Intrinsic value of equity immediately Intrinsic value of equity immediately after the stock repurchase prior to stock repurchase Intrinsic stock price immediately Intrinsic stock price immediately after the stock repurchase prior to the stock repurchase true or false: Based on your understanding of stock repurchases, identify whether the following statement The value of operations depends on whether a firm decides to make distributions in the form of dividends or stock repurchases. depend on how the This statement is because ignoring possible tax effects and signals, the value of a firm's operations firm distributes its residual earnings