How many shares will remain after the repurchase

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Problem 1: A firm's most recent FCF was $2.4 million; the FCF is expected to grow at a constant rate of 5%. The WACC is 14% and there are 2 million shares outstanding. The firm has $12 million in short-term investments which it plans to liquidate distribute in a stock repurchase; the firm has no other financial investments or debt. Verify that the value of operations is $28 million. Immediately prior to the repurchase, what are the intrinsic value of equity and the intrinsic stock price? How many shares will be repurchased? How many shares will remain after the repurchase? Immediately after the repurchase, what are the intrinsic value of equity and the intrinsic stock price?

Reference no: EM132729036

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