Use the Information for the Question(s)below

question 43

Multiple Choice

Use the information for the question(s) below.
Iota Industries is an all-equity firm with 50 million shares outstanding.Iota has $200 million in cash and expects future free cash flows of $75 million per year.Management plans to use the cash to expand the firm's operations,which in turn will increase future free cash flows by 12%.Iota's cost of capital is 10% and assume that capital markets are perfect.
-The value of Iota if they use the $200 million to expand is closest to:

• A)$825 million.
• B)$688 million.
• C)$840 million.
• D)$950 million.

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Definitions:

Variable-Ratio Reinforcement

A reinforcement strategy in which a response is rewarded after an unpredictable number of responses, promoting a high and steady rate of response.

Internal Locus

The belief that one has control over their life and the outcomes of their actions, as opposed to external forces.

Control

In experimental research, the standard by which experimental observations are compared, or the ability to direct influence or regulate a situation or mechanism.

Negative Punishment

A method in behavioral psychology where a desirable stimulus is removed following an unwanted behavior, aiming to decrease the likelihood of the behavior occurring again.