Use the Information for the Question(s) Below

question 13

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

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

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Definitions:

Fulfillment Center

Warehouse facilities used to ship merchandise directly to customers.

Distribution Center

A specialized facility that handles the storage and distribution of goods to retailers or direct to customers, often optimizing order fulfillment and shipping processes.

Directly

In a straightforward or straight line manner; without intervening factors or intermediaries.

Marketing Channel

Pathways and processes through which goods and services flow from producers to consumers.