6. Dividends, repurchases, and firm value Remember that the primary goal of a firm is to maximize shareholder wealth by increasing the firms intrinsic value. It is thus important to understand the impact of distributionsboth in the form of dividends or stock repurchaseson the firms value. Consider the following situation: Danielle is a financial analyst in BTR Warehousing. As part of her analysis of the annual distribution policy and its impact on the firms value, she makes the following calculations and observations: The company generated a free cash flow (FCF) of $84 million in its most recent fiscal year. The firms cost of capital (WACC) is 12%. The firm has been growing at 7% for the past six years but is expected to grow at a constant rate of 6% in the future. The firm has 21.00 million shares outstanding. The company has $224 million in debt and $140 million in preferred stock. Along with the rest of the finance team, Danielle has been part of board meetings and knows that the company is planning to distribute $90 million, which is invested in short-term investments, to its shareholders by buying back stock from its shareholders. Danielle also observed that, at this point, apart from the $90 million in short-term investments, the firm has no other nonoperating assets. Using results from Danielles calculations and observations, solve for the values in the following tables. Select the best answer provided in the selection list. Value per share Value of the firms operations Intrinsic value of equity immediately prior to stock repurchase Intrinsic stock price immediately prior to the stock repurchase Number of shares repurchased Intrinsic value of equity immediately after the stock repurchase Intrinsic stock price immediately after the stock repurchase Based on your understanding of stock repurchases, identify whether the following statement is true or false: The value of operations depends on whether a firm decides to make distributions in the form of dividends or stock repurchases. This statement is because ignoring possible tax effects and signals, the value of a firms operations depend on how the firm distributes its residual earnings.