Analysis of annual distribution policy-impact on firm value

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Reference no: EM13948628

Melanee is a financial analyst in Bidget Corp. 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 of $120 million in it’s most recent fiscal year. The firms cost of capital is 12% The firm has been growing at 8% for the past six years but is expected to grow at a constant rate of 7% in the future. The firm has 30.00 million shares outstanding The company has $320 million in debt and $200 million in preferred stock Along with the rest of the financial team, Melanee has been part of board meetings and knows that the company is planning to distribute $105 million, which is invested in short term investments, to its shareholders by buying back stock from it’s shareholders. Melanee also observed that at this point aport from the $105 million in short term investments, the firm have no other nonoperating assets. Solve for: 1.Value of the firm’s operations- 2.Intrinsic value of equity immediately- 3.Intrinsic stock price immediately prior to the stock repurchase- 4.Number of shares repurchased- 5.Intrinsic value of equity immediately after the stock repurchase- 6.Intrinsic value price immediately after the stock repurchase-

Possible answers are- Intrinsic value of Equity before sale it has to be a. 2473 mill B. 2353 mil C. 2048 mil D. 2153 mil. Intrinsic stock price before repurchase choices are A. 82.43 B. 78.43 C. 71.77 D. 68.27 Number of share repurchased it's A 1.4million B. 2.48 million C. 1.90 million D. 1.17 million. Intrinsic value price after repurchase are A. 82.43 B. 78.43 C. 71.77 D 68.27

Reference no: EM13948628

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Analysis of annual distribution policy-impact on firm value : Melanee is a financial analyst in Bidget Corp. 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 of $120 million..

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