Use the Information for the Question(s)below

question 83

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 price per share of Iota if they use the $200 million to expand is closest to:

• A)$13.75.
• B)$16.50.
• C)$19.00.
• D)$16.80.

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Definitions:

Gross Amount

The total amount before any deductions, such as taxes, expenses, or discounts, are subtracted.

Trade Receivables

Trade receivables are amounts due to a business for goods sold or services provided on credit terms to customers.

Formal Instrument

A legal document expressing an agreement, obligation, or right enforceable by law.

Note Receivable

A financial asset representing a written promise for the repayment of a specific amount of money, plus interest, by a debtor to the lender at a future date.