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:

Chain-Of-Command

The hierarchy within an organization that establishes who is in charge of whom and of whom permission must be asked.

Status Generalization

The process by which attributes of individuals, unrelated to a particular situation, influence the formation of status hierarchies within groups.

Biased

Having a predisposition or prejudice towards or against something or someone, often in a way considered to be unfair.

Middle Class

A socioeconomic group between the working class and upper class, typically associated with a moderate income, education, and lifestyle.