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New Value Corp (NVC) most recent free cash flow (FCF) was $195 million; the FCF...

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Finance

New Value Corp (NVC) most recent free cash flow (FCF) was $195 million; the FCF is expected to grow at a constant rate of 3.5%. The rms WACC is 12%, and it has 8 million shares of common stock outstanding. The rm has $200 million in short-term investments, which it plans to liquidate and distribute to common shareholders via a stock repurchase; the rm has no other non-operating assets. It has $968 million in debt and $260 million in preferred stock.

a. What is the value of operations?

b. Immediately prior to the repurchase, what is the intrinsic value of equity?

c. Immediately prior to the repurchase, what is the intrinsic stock price?

d. How many shares will be repurchased? How many shares will remain after the repurchase?

e. Immediately after the repurchase, what is the intrinsic value of equity? The intrinsic stock price?

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