Suppose That Iota Is Able to Invest the $200 Million

question 63

Essay

Suppose that Iota is able to invest the $200 million in excess cash into a project that will increase future free cash flows by 30%.If you were advising the board,what course of action would you recommend: investing the $200 million in an expansion project that will raise future free cash flows by 30% or using the $200 million to repurchase shares? Which provides the higher stock price?

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Definitions:

Decision-making

The process of choosing the best alternative for reaching objectives.

Organization

An entity composed of multiple people working together towards common goals or objectives, structured to coordinate their activities.

Differentiation

A strategy or process of distinguishing a product, service, or brand from others in the market to create a competitive advantage or appeal to a specific target audience.

Complexity

The degree to which a system or process has multiple components that are interconnected and which require careful consideration or analysis.