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

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Definitions:

Functional Similarities

The aspects in which different things show a likeness in purpose, role, or use.

Psychoanalysis

A therapeutic approach and theory of psychopathology, developed by Sigmund Freud, focusing on unconscious processes and resolving internal conflicts.

Childhood Feelings

Emotions or sentiments experienced during the early years of life, which can significantly influence personality and psychological development.

Unconscious

The part of the mind that is inaccessible to the conscious mind but that affects behavior and emotions.