Use the Information for the Question(s) Below

question 94

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

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

---

Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal to ensure the accounting system's mathematical correctness.

Errors

Errors are mistakes or inaccuracies that occur in financial statements or other business documents, often necessitating corrections.

Debits

The left side of an accounting ledger where increases in expenses, assets, or decreases in liabilities and equities are recorded.

Credits

Entries in the accounting system that represent an increase in liabilities or equity or a reduction in assets, commonly associated with income and receipts.