Problem 17-12
Stock Repurchase
Bayani Bakery's most recent FCF was $47 million; the FCF is expected to grow at a constant rate of 6%. The firm's WACC is 11% and it has 15 million shares of common stock outstanding. The firm has $30 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 $370 million in debt and $56 million in preferred stock.
What is the value of operations? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
$ million
Immediately prior to the repurchase, what is the intrinsic value of equity?Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places.
$ million
Immediately prior to the repurchase, what is the intrinsic stock price? Round your answer to the nearest cent.
$ per share
How many shares will be repurchased? Round your answer to the nearest whole number.
shares
How many shares will remain after the repurchase? Round your answer to the nearest whole number.
shares
Immediately after the repurchase, what is the intrinsic value of equity? Round your answer to the nearest dollar.
$
The intrinsic stock price?
$ per share Round your answer to two decimal places.
| Problem 17-12 Bayani Bakery's most recent FCF was $47 million; the FCF is expected to grow at a constant rate of 6%. The firm's WACC is 11% and it has 15 million shares of common stock outstanding. The firm has $30 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 $370 million in debt and $56 million in preferred stock. What is the value of operations? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. Immediately prior to the repurchase, what is the intrinsic value of equity?Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to two decimal places. Immediately prior to the repurchase, what is the intrinsic stock price? Round your answer to the nearest cent. How many shares will be repurchased? Round your answer to the nearest whole number. Immediately after the repurchase, what is the intrinsic value of equity? Round your answer to the nearest dollar. |
Related questions
Free Cash Flows
Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)
| 2013 | 2012 | ||
| Sales | $4,025.0 | $3,500.0 | |
| Operating costs excluding depreciation | 3,019.0 | 2,975.0 | |
| Depreciation and amortization | 126.0 | 105.0 | |
| Earnings before interest and taxes | $880.0 | $420.0 | |
| Less: Interest | 87.0 | 75.0 | |
| Pre-tax income | $793.0 | $345.0 | |
| Taxes (40%) | 317.2 | 138.0 | |
| Net income available to common stockholders | $475.8 | $207.0 | |
| Common dividends | $428.0 | $166.0 |
Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)
| 2013 | 2012 | ||
| Assets | |||
| Cash | $51.0 | $46.0 | |
| Short-term investments | 21.0 | 18.0 | |
| Accounts receivable | 630.0 | 525.0 | |
| Inventories | 1,050.0 | 875.0 | |
| Total current assets | $1,752.0 | $1,464.0 | |
| Net plant and equipment | 1,260.0 | 1,050.0 | |
| Total assets | $3,012.0 | $2,514.0 | |
| Liabilities and Equity | |||
| Accounts payable | $385.0 | $350.0 | |
| Accruals | 319.0 | 245.0 | |
| Notes payable | 81.0 | 70.0 | |
| Total current liabilities | $785.0 | $665.0 | |
| Long-term bonds | 805.0 | 700.0 | |
| Total liabilities | $1,590.0 | $1,365.0 | |
| Common stock | 1,312.2 | 1,087.0 | |
| Retained earnings | 109.8 | 62.0 | |
| Total common equity | $1,422.0 | $1,149.0 | |
| Total liabilities and equity | $3,012.0 | $2,514.0 | |
Using Rhodes Corporation's financial statements (shown above), answer the following questions.
What is the net operating profit after taxes (NOPAT) for 2013? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
$______ million
What are the amounts of net operating working capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
2013 $ ____ million
2012 $ ____ million
What are the amounts of total net operating capital for both years? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
2013 $ ____ million
2012 $ ____ million
What is the free cash flow for 2013? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place.
$ ________ million
What is the ROIC for 2013? Round your answer to two decimal places.
______ %
How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answers to one decimal place.
| After-tax interest payment | $____ million |
| Reduction (increase) in debt | $ ____ million |
| Payment of dividends | $____ million |
| Repurchase (Issue) stock | $____ million |
| Purchase (Sale) of short-term investments | $____ million |
