Use the Information for the Question(s) Below

question 69

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 choose not to use the $200 million to expand and hold the cash instead is closest to:

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

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Definitions:

Field Experiment

An empirical study conducted in a real-world setting in which variables are manipulated to determine their effect on a particular outcome.

Dyadic Theories

Dyadic theories focus on the two-way relationships between leaders and followers, analyzing how interpersonal interactions contribute to leadership effectiveness and outcomes.

Group-Level

Pertaining to the characteristics, dynamics, or outcomes of a group rather than individual members.

Financial Performance

A measure of how well a firm is using its assets to generate earnings.