Bayani Bakery\'s most recent FCF was $47 million; the FCF is expected to grow at

Question

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 14% 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 $364 million in debt and $65 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? 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 shares

How many shares will remain after the repurchase? 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 shares

Immediately after 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

The intrinsic stock price? Round your answer to two decimal places.
$ per share

Explanation / Answer

Ans

Sl No Details Amount in Mn a Free Cash flow 47 WACC 14% Constant Growth Rate 6% Valuation of Operations Free Cash Flows/(K-g) 587.5 b Intrinsic Value of equity Value of firm=Value of operation using DCF method 587.5 Less: Value of Debt -364 Less: Value of Preferred shares -65 Intrinsic Value of equity 158.5 c Intrinsic Stock Price Intrinsic Value of equity 158.5 No of common stock outstanding 15 Intrinsic Value per stock In $                                10.57 d No of Stock to be repurchased Intrinsic Stock Price per stock In $                                10.57 Total amount for repurchase               300,00,000.00 Total No of stock to be repurchased in Mn                                  2.84 e Remaining No of stock Total no of stock before repurchase 15 Less: Repurchase                                 -2.84 Remaining no of stock 12.16 f Intrinsic Value of equity after repurchase It will remain as such assuming the shorterm investment are excess to the operations and will not affect the FCF in any manner 158.5 g Intrinsic Value per stock Intrinsic value of the equity 158.5 Total No of common stock after buy back 12.16 Intrinsic Value per stock in $                                13.03

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